Additional First-Year Depreciation

Tax law provision permitting a certain amount of depreciable business personal property purchased each year to be expensed, rather than depreciated, provided not more than $200,000 is purchased in a year. This amount is $19,000 in 1999, $20,000 in 2000, $24,000 in 2001 and 2002, and $25,000 in 2003. The amount is phased out, dollar for dollar, when purchases exceed $200,000 in a year. The expense deduction is limited to the net income the taxpayer earns from the active conduct of all trades or businesses during the year.

Tax provision that allows up to $100,000 of depreciable personal property purchased each year for 2003 through 2005 to be expensed, rather than depreciated, provided that not more than $400,000 is purchased in a year. The $100,000 is phased out, dollar for dollar, when purchases exceed $400,000 in a year. See also Bonus Depreciation.
Example: Barbara is a real estate broker. She bought a $4,000 computer to assist with her business; she may expense the cost in the year purchased, rather than depreciate the equipment.