Bonus Depreciation

The Bonus Depreciation laws for 2011 mean that 85% of the total installation cost can offset taxable income in the very first year. The “bonus” feature of this depreciation changes dramatically in 2012; Depreciation will still exist, but over a longer 5-year schedule.

To determine the total value of this incentive, multiply your corporate tax rate by the total system cost and multiply again by 85%. For example, assume a system cost on a fairly large system to be $500,000. If your corporate tax rate is 34%, the depreciation value is 34% * $500,000 * 85%, or $144,500.