The Internal Revenue Service said it would soon issue guidance to help businesses determine how to use the special 50 percent bonus depreciation allowance included with the recent economic stimulus legislation.

The Economic Stimulus Act of 2008 encourages businesses to make capital investments by adding a special 50 percent depreciation allowance for qualifying purchases. The allowance is available to all businesses and applies to most types of tangible personal property and computer software acquired and placed in service in 2008. Taxpayers can deduct 50 percent of the cost of qualifying property in addition to the regular depreciation allowance.

However, businesses and accountants have been asking the IRS to spell out how to apply the new bonus depreciation. Until the new guidance is available, businesses can rely on previously issued bonus depreciation regulations, said the IRS. The provision in the recent law is generally patterned after prior bonus depreciation statutes, and the Treasury Department and the IRS intend to issue guidance allowing taxpayers generally to rely on Treas. Reg. Sec. 1.168(k)-1.

The Treasury Department and IRS are preparing additional guidance to address other issues, including the new increased limits that businesses can expense under the Economic Stimulus Act. Generally, the new law set a limit of $250,000 that a business can expense during 2008, up from the previous limit of $128,000. A detailed description of the business provisions in the Economic Stimulus Act is available in IRS Publication 553, Highlights of 2007 Tax Changes.

Businesses and tax professionals may write to the IRS at Notice.Comments@irscounsel.treas.gov to ask about issues that they would like to see addressed in the upcoming guidance. They should include "IR-2008-58" in the subject line of the e-mail.

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