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Electing 50% Bonus for 2017 Returns is All or None

Published on: 16:46PM Feb 12, 2018

For assets acquired and placed in service after September 27, 2017, 100% bonus depreciation applies.  This is true for all farm assets other than land, whether new or used .  There is a special election that allows taxpayers to elect the old 50% bonus depreciation for the first tax year ending after this date.

Under old tax laws, you could elect out of 50% bonus depreciation on a depreciable-by-depreciable life basis.  For example, a farmer could have 5, 7, 10 and 15 year property.  He/She could elect out of 50% bonus on the 5 and 7 year property and keep 50% bonus on 10 and 15 year property.

The special election out of 100% bonus and into 50% bonus on those assets acquired after September 27, 2017 is an all-or-none election.  Therefore, you can take 100% bonus depreciation as under the old law (elect out on selected lives) or if you want only 50% you have to elect this on all assets.

As an example, assume Farmer Jones purchases a new tractor for $300,000 on March 1, 2017, a new combine for $500,000 on November 1, 2017, and puts new tile in for $100,000 in June 2017 and then another $100,000 of tiling in November 2017.  The farmer could use bonus depreciation as follows:
•Take 50% bonus on the tractor and $100,000 of June 2017 tile ,
•Take 100% bonus on the combine and $100,000 of November 2017 tile,
•Elect out of 50%/100% bonus on the tractor and combine (these are the same depreciable lives at least until December 31, 2017),
•Elect out of 50%/100% bonus on the tile (both June and November),
•Elect out of 50% bonus on either the tractor or June tile and elect out of 100% bonus on combine and November tile by taking 50% on each (required to take 50% on each asset).

To make the election, you simply attach a statement to the tax return indicating you are making the election.