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BK-CPA, Certified Public Accountant (CPA)
Category: Tax
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Experience:  Owner of a CPA firm
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If I put a solar water heating device on my commercial building

Customer Question

If I put a solar water heating device on my commercial building in 2010 can I get the bonus depreciation spoken of in us code citation 26usc section 481 ?
Submitted: 6 years ago.
Category: Tax
Expert:  BK-CPA replied 6 years ago.
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Expert:  BK-CPA replied 6 years ago.

I don't think there is a bonus depreciation allowance associated with Title 26 of the US Code, Section 481. Here is that very section, which has to do with adjustments due method changes in accounting (are you thinking about a tax credit perhaps?):


TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter E > PART III > § 481

§ 481. Adjustments required by changes in method of accounting







I do think you might be talking about the bonus depreciation discussed in IRC 168 (ie, Title 26, Internal Revenue Code Section 168). That is the 50% bonus or special allowance as is also referred.


It is true, I believe, under the right conditions. The first major barrier is that Congress has to extend the bonus depreciation election to assets purchased in 2010. The second is overcoming the fact that IRC 1250 property (real property) does not qualify for bonus depreciation in general, having too long a class life (must be less than 20 years). This is accomplished by buying a property described in IRC 168(e)(3)(B) and/or IRC 48(a)(3)(A) relating to your solar water heater (but not for a swimming pool), as five year property (not real property). Assuming that happens, here is the current code and thank you for your question:


IRC 168


(k) Special allowance for certain property acquired after December 31, 2007, and before January 1, 2010


(2) Qualified property For purposes of this subsection-


(A) In general The term "qualified property" means property-



(I) to which this section applies which has a recovery period of 20 years or less,

(II) which is computer software (as defined in section 167 (f)(1)(B)) for which a deduction is allowable under section 167 (a) without regard to this subsection,

(III) which is water utility property, or

(IV) which is qualified leasehold improvement property,


(ii) the original use of which commences with the taxpayer after December 31, 2007,


(iii) which is-

(I) acquired by the taxpayer after December 31, 2007, and before January 1, 2010, but only if no written binding contract for the acquisition was in effect before January 1, 2008, or

(II) acquired by the taxpayer pursuant to a written binding contract which was entered into after December 31, 2007, and before January 1, 2010, and


(iv) which is placed in service by the taxpayer before January 1, 2010, or, in the case of property described in subparagraph (B) or (C), before January 1, 2011.








Normally, Section 1250 property does not qualify for bonus depreciation, however, there is an exception. Note IRC 168(e)(3)(B):


(B) 5-year property The term "5-year property" includes-


(vi) any property which-


(I) is described in subparagraph (A) of section 48 (a)(3) (or would be so described if "solar or wind energy" were substituted for "solar energy" in clause (i) thereof and the last sentence of such section did not apply to such subparagraph),









Now, off to IRC 48(a)(3)(A), described above in IRC 168(e)(3)(B)(vi)(I), which just so happens to be here:

§ 48. Energy credit

(a) Energy credit

(3) Energy property For purposes of this subpart, the term "energy property" means any property-


(A) which is-


(i) equipment which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, excepting property used to generate energy for the purposes of heating a swimming pool,






Edited by BK-CPA on 9/1/2010 at 7:14 PM EST