Increased section 179 deduction dollar limit. The maximum amount you can elect to deduct for most section 179 property you placed in service during 2004 is $102,000. This limit is reduced by the amount by which the cost of the property placed in service during the tax year exceeds $410,000. See Dollar Limits under How Much Can You Deduct in chapter 2.

Section 179 deduction limit for sport utility and certain other vehicles. The maximum section 179 expense deduction for sport utility vehicles and certain other vehicles placed in service after October 22, 2004, is $25,000. For more information, see Section 179 Deduction Limit for Sport Utility and Certain Other Vehicles in chapter 2.

Bonus depreciation for aircraft. Certain non-commercial aircraft placed in service before January 1, 2006, are eligible for the special depreciation allowances. See What Is Qualified Property in chapter 3.

Election out for qualified New York Liberty Zone (Liberty Zone) leasehold improvement property. . You can elect not to treat certain qualified Liberty Zone leasehold improvement property as 5-year property. For more information, see Which Property Class Applies Under GDS in chapter 4.

Recovery period for qualified leasehold improvement and qualified restaurant property. Qualified leasehold improvement property and qualified restaurant property placed in service after October 22, 2004, and before January 1, 2006, are treated as 15-year property under MACRS. See Figuring Depreciation Under MACRS in chapter 4.

Depreciation deduction for property acquired in a nontaxable exchange. New guidance has been issued for depreciating MACRS property acquired after February 27, 2004 in a like-kind exchange or involuntary conversion. See Figuring the Deduction for Property Acquired in a Nontaxable Exchange in chapter 4.

Depreciation limits on business vehicles. The total section 179 deduction and depreciation (including the special depreciation allowance) you can deduct for a passenger automobile (that is not an electric vehicle or a truck or van) you use in your business and first placed in service in 2004 is generally $10,610. The maximum deduction for an electric vehicle is generally $31,830. The maximum deduction you can take for a truck or van you use in your business and first placed in service in 2004 is generally $10,910. See Maximum Depreciation Deduction in chapter 5.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Additional special depreciation allowances. The additional special depreciation allowances will not apply to most property placed in service after December 31, 2004. For more information, see Claiming the Special Depreciation Allowance (or Liberty Zone Depreciation Allowance) in chapter 3.

This publication explains how you can recover the cost of business or income-producing property through deductions for depreciation (the special depreciation allowance, the special Liberty Zone depreciation allowance, and deductions under the Modified Accelerated Cost Recovery System). It also explains how you can elect to take a section 179 deduction, instead of depreciation deductions, for certain property and the additional rules for listed property. In addition, the publication describes how to figure depreciation and how to fill out Form 4562, Depreciation and Amortization.