Per Diem Rates from the U.S. General Services Administration
Search by city, state or ZIP code, or by clicking on the map. You can also use the new per diem tool to calculate trip allowances
Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
Claiming First-Year Expensing and Bonus Depreciation
Instead of recovering the cost of business property over several years through the regular depreciation process, you can recover the entire cost of property (up to a limit) in the year the property is placed in service by claiming first-year expensing (also called the section 179 deduction).
First-year expensing is limited to tangible personal property purchased for business use.
Examples:
- A car or truck acquired from an unrelated party
- Computer
- Machinery
- Office equipment
- Furniture
- Off-the-shelf software
Maximum Expensing Deduction for the Following Tax Years:
- 2021: $1,050,000
- 2020: $1,040,000
- 2019: $1,020,000
Annual First-year Expensing Deduction Limit:
If the total cost of annual purchases of qualified property exceeds a specified amount, the expensing deduction is reduced dollar-for-dollar by the excess amount.
The following are the annual purchasing limits for tax years 2019-2021:
- 2021: $2,620,000
- 2020: $2,590,000
- 2019: $2,550,000
Example:
You place machinery in service during 2021 costing $2,700,000. The $1,050,000 deduction limit is reduced by $80,000 to $970,000 ($1,050,000-($2,700,000-$2,620,000)). (Entered on Form 4562 in Part 1.)
When First-Year Expensing is Not Allowed
First-year expensing is not allowed for the following:
- Buildings
- Structural components of buildings
- Furniture and refrigerators used in operating apartment buildings
- Property held for the production of income
- Property used 50% or less for business
Partial Business Use:
If you use your vehicle less than 100% for business you must allocate the deduction according to your business use percentage.
For example, if your total annual vehicle mileage was 40,000, and 20,000 miles were for business purposes, your business-use percentage would be 50%.
Placed in Service
Property is considered to be placed in service when it is both ready and available for use in a trade or business, a tax-exempt activity, a personal activity, or for the production of income. Even if the property is not being used, it is still considered to be in service when it is ready and available for use.
Keep in mind, property first used for personal purposes cannot qualify for first-year expensing in a later year when its use changes from personal use to business use.
Example:
In 2020 you bought a new car and used it for personal purposes. In 2021 you began using your car for business purposes. You may not claim the sec. 179 deduction because it was originally used for personal purposes. However, you may claim regular MACRS depreciation for the business use of the car starting in 2021. Under MACRS depreciation, you deduct part of the cost of the car over several years.
Heavy Trucks Vans and SUVs (over 6,000 pounds)
Maximum 2021 Deduction for Heavy Trucks, Vans, and SUVs:
Trucks, vans and SUVs built on a truck chasis that are weight-rated by the manufacturer at more than 6,000 pounds gross vehicle weight (fully loaded) but not more than 14,000 pounds are NOT subject to the annual depreciation ceilings that lighter weight vehicles are subject to, such as passenger cars, light trucks and vans.
The first-year expensing deduction is limited to $26,200 for heavy trucks, vans and SUVs.
The $26,200 first-year expensing limit does not apply to:
- A vehicle designed to seat more than nine persons behind the driver's seat.
- A vehicle equipped with a cargo area (either open or enclosed by a cap) of at least six feet in interior length that is not readily accessible directly from the passenger compartment, or
- A vehicle that has an integral enclosure fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield.
Maximum 2021 Depreciation Deduction for Vehicles Weighing 6,000 Pounds or Less (cars, light tucks, SUVs or vans):
The ceiling on depreciation for a vehicle weighing 6,000 pounds or less and placed in service in 2021 is generally $10,200, reduced for personal use.
However, if the vehicle is used more than 50% for business in 2021, the first-year dollar limit of $10,200 is increased by an $8,000 bonus depreciation, for a total deduction of $18,200, reduced for personal use. You can elect not to claim the bonus allowance.
Certain vehicles are exempt from the annual depreciation limits, such as an ambulance, hearse, or combination hearse-ambulance used directly in business, taxi cabs used for transporting persons or property for compensation or hire.
Reminder:
The Tax Cuts and Jobs Act passed in December 2017, removed computers or peripheral equipment from the definition of listed property. This change applied to property placed in service after Dec. 31, 2017.
Expensing Deduction Limitation for Property Acquired in a Trade-in
If you acquire property in a trade-in, the cost eligible for first-year expensing is limited to the cash you paid.
Keep in mind, the adjusted basis of the property you traded in is not eligible for first-year expensing even though the basis in the new property includes the adjusted basis of the property you traded in.
Taxable Income Limitation:
The first-year expensing deduction may not exceed the net taxable income from all businesses you actively conduct. Note that wages from a job you or your spouse (if married) earns is considered a business you actively conduct for the purpose of figuring your taxable income limitation.
Example:
- You're a sole proprietor
- Your Schedule C net income is $30,000
- You also have a part-time job and earned W-2 wages of $5,000
- Your spouse has a job and earned W-2 wages of $20,000
The taxable income limitation for the first-year expensing is $55,000 ($30,000 net income from the business plus $25,000 in W-2 wages).
You calculate net income from active businesses without regard to the following items:
- The first-year expensing deduction
- The deduction for self-employment tax entered on Form 1040
- Any net operating loss carryback or carryforward
Net loss from all actively conducted businesses:
If you have an overall net loss from all actively conducted businesses you may not claim an expensing deduction for that year.
Net taxable income less than cost of qualifying property:
If overall net taxable income is less than the cost of qualifying property, the first-year expensing deduction is limited to net taxable income.
However, the cost that exceeds overall net taxable income may be carried over to the following year and added to the annual expensing allowance for that year.
Example:
In 2021, your spouses wages from her job were $20,000. Your Schedule C net profit from your sole proprietorship was $80,000. In 2021 you purchased and placed in service qualified property costing $108,000.
Your maximum deduction for 2021 is $100,000 (equal to your spouse's wages and your Schedule C net profit). You may carry over the remaining $8,000 to 2022 and add it to your first-year-expensing allowance for that year.
Your carryover to 2022 is barred if you did not claim the first-year expensing deduction on your return for the year the property was placed in service. You must complete the expensing section of Form 4562 for 2021 in order to get a carryover to 2022.
Accelerated MACRS Recapture
If you dispose of property you depreciated using MACRS, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the depreciation previously allowed or allowable.
Recapture of Section 179 Expense Deduction on Listed Property
If you used listed property more than 50% for a qualified business use in the year you placed the property in service and use it 50% or less in a later year, you may have to recapture in the later year part of the section 179 expense deduction. Use Form 4797 to figure the recapture amount.
Residential Rental and Non-residential Rental Real Property
There is no recapture for residential rental and nonresidential real property, unless that property is qualified property for which you claimed a special depreciation allowance (discussed earlier). For more information on depreciation recapture, see Pub. 946.
Bonus Depreciation (also called the special depreciation deduction and Section 168(k) deduction)
Bonus depreciation is an additional first year depreciation allowance. It is calculated by multiplying the adjusted basis of eligible property by a set percentage. For 2021 you may deduct 100% of the cost of eligible property. As a practical matter, this means you don't need to use first-year expensing.
If You Claim First-year Expensing and Bonus Depreciation:
In figuring the adjusted basis of eligible property for purposes of bonus depreciation, you must first subtract the amount of your first-year expensing deduction from the original cost of the property to find its adjusted basis.
Then, multiply the adjusted basis by the bonus depreciation rate. If there is any remaining adjusted basis after reducing the original cost of the property by both the first-year expensing amount and the bonus depreciation amount, you may claim regular MACRS depreciation on the remaining basis.
Under the Tax Cuts and Jobs Act, signed into law during December 2017, property no longer has to be new to be eligible for the 100% bonus depreciation deduction, as long as it is the taxpayer's first use of the property. (Under prior law, the property had to be new.)
Keep in mind, you are deemed to have claimed bonus depreciation even if you did not and must reduce the basis of property by the amount of the deduction you could have claimed.
However, you may opt out of bonus depreciation by attaching a statement to your return. The election is made on a per-asset basis. For example, you can opt out for five-year property while claiming bonus depreciation for seven-year property.
In addition, the election must be made separately by each person owning qualified property (for example, by the partnerships, by the S corporation, or for each member of a consolidated group by the common parent of the group).
Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service.
However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the original return (not including extensions).
Attach the election statement to the amended return. On the amended return, write Filed pursuant to section 301.9100-2.
Once you elect not to deduct a special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. A request to revoke the election is a request for a letter ruling.