How to Elect Out of Bonus Depreciation

How to Elect Out of Bonus Depreciation
Bonus depreciation is automatic unless you elect not to take it.

Step 1

Attach a statement to your timely filed tax return (including extensions) explaining why you are electing not to take this special allowance. One reason a business may elect to do this is in order to increase its credit limitations.

Step 2

The election can be applied for any or all classes of assets. Therefore, state the class of property for the election (for example, seven-year property); once this is decided, the election has to apply to all of the assets in that particular class. For example, office fixtures and furniture (chairs, desks, files) are seven-year property that you may elect out of bonus depreciation for your business, but you would also have to elect out any communications equipment that you might possess at the time, such as fax machines, since this is also seven-year property.

Step 3

If you failed to elect not to take bonus depreciation on your original return, there is a remedy. File an amended return within six months of the timely filed original return, without including any extensions for that original return. Attach a statement to the amended return and write at the top, “Filed pursuant to section 301.9100-2.”