When to Take Bonus Depreciation

We had a reader ask the following question:

“I ordered a new machine shed in December 2010, and put down a partial down payment. Can I take the bonus depreciation in 2010, or do I have to wait until tax year 2011 when the building will be erected?”

For new farmings buildings started in 2010, but not placed in service until 2011, the actual date when you can take the bonus depreciation is 2011.  Depreciation expense is allowed at the later of (1) the date bought or (2) the date available for service.  Even if you paid for all of the building costs in 2010, but did not finish the building until January, 2011, the bonus depreciation is taken in 2011 not 2010.

These date rules are true for equipment purchases as well.  If you buy a grain drill in 2010 that is unassembled and you assemble it in 2011, the depreciation is allowed in 2011, not 2010.