Depreciation and the Tax Reform Act of 1986 (PL 99-514)

An important business tax provision of the Tax Reform Act of 1986 is the new tax depreciation rules for business assets. The effect of the Tax Reform Act's changes was to slow down the rate at which the cost of most assets can be depreciated. Depreciation deductions are thus less valuable to businesses than under prior law. The Act's depreciation changes, along with its repeal of the investment tax credit, also increased the tax burden on depreciable assets compared to other types of investments. While the primary purpose of this report is to describe the changes in depreciation rules and their effects, the report also contains basic information on the rationale for depreciation deductions and how the deductions are calculated.,Depreciation in General -- Depreciation Under Prior Law -- Depreciation Under the Tax Reform Act -- Effect of the Tax Reform Act and the Tax Burden on Depreciable Assets -- Appendix. Depreciation Methods ; The Half-Year Convention and Recovery Periods ; Sample Depreciation Calculations Under Prior Law ; Sample Depreciation Calculations under the Tax Reform Act of 1986.,David L. Brumbaugh, Analyst in Public Finance, Econmics Division.,CRS 87-342 E,"April 16, 1987.",SuDoc# LC 14. 18/3