Current "Bonus Depreciation" Percentage Rate:

New "Bonus Depreciation" Percentage Rate:

Asset Class (years) per Internal Revenue Service:
Annual Discount Rate Applicable to this Asset:
Number of Months Prior to Initial Tax Benefit Occurring from Bonus Depreciation that the
Asset is Placed into Service:*
Depreciable Basis of the Asset:
Firm's Marginal Tax Rate:
Change in NPV Today:
Change in NPV as % of Original Depreciable Basis:
Bonus Depreciation Calculator
Assumptions:
This Excel program, and all contents, are Copyright (c) 2011 by Gregory A. Kuhlemeyer and John M. Wachowicz, Jr. All
rights reserved. For an online article that develops this Excel model, see: Kuhlemeyer, Gregory A. and Wachowicz, John M.,
"The Impact of Bonus Depreciation on Project Decision Making." Financial Decisions, Winter 2011, Article 2.
<http://www.financialdecisionsonline.org/current/KuhlemeyerWachowiczWinter2011.pdf>
The information contained in and derived from this calculator is provided as a public service. It should not be construed as
tax advice or a promise of potential savings or reduced tax liability. For more information about the bonus depreciation,
contact a tax professional or visit the Internal Revenue Service website at http://www.irs.gov .
INPUTS:
OUTPUTS:
Impact on NPV by utilizing bonus depreciation
* It can range from 0 to 12 months. All additional (negative) tax benefits from bonus depreciation are assumed to occur one
year apart after the initial (positive) tax benefit from bonus depreciation.
1. The standard MACRS schedule is utilized both with and without bonus depreciation.
2. The discount rate used is consistent throughout the depreciable life of the asset.
3. The asset is retained for the entire depreciable time and embedded options are ignored.
4. The marginal tax rate does not change over the depreciable life of the asset.
0.00%
50.00%
10
12.00%
12
100,000.00 $
40.00%
5,689.07 $
5.69%
Bonus Depreciation Calculator
Assumptions:
This Excel program, and all contents, are Copyright (c) 2011 by Gregory A. Kuhlemeyer and John M. Wachowicz, Jr. All
rights reserved. For an online article that develops this Excel model, see: Kuhlemeyer, Gregory A. and Wachowicz, John M.,
"The Impact of Bonus Depreciation on Project Decision Making." Financial Decisions, Winter 2011, Article 2.
<http://www.financialdecisionsonline.org/current/KuhlemeyerWachowiczWinter2011.pdf>
The information contained in and derived from this calculator is provided as a public service. It should not be construed as
tax advice or a promise of potential savings or reduced tax liability. For more information about the bonus depreciation,
contact a tax professional or visit the Internal Revenue Service website at http://www.irs.gov .
INPUTS:
OUTPUTS:
Impact on NPV by utilizing bonus depreciation
* It can range from 0 to 12 months. All additional (negative) tax benefits from bonus depreciation are assumed to occur one
year apart after the initial (positive) tax benefit from bonus depreciation.
1. The standard MACRS schedule is utilized both with and without bonus depreciation.
2. The discount rate used is consistent throughout the depreciable life of the asset.
3. The asset is retained for the entire depreciable time and embedded options are ignored.
4. The marginal tax rate does not change over the depreciable life of the asset.
3 5 7 10 15 20
1 33.33% 40.00% 42.86% 45.00% 47.50% 48.13%
2 -22.22% -16.00% -12.24% -9.00% -4.75% -3.61%
3 -7.41% -9.60% -8.75% -7.20% -4.28% -3.34%
4 -3.70% -5.76% -6.25% -5.76% -3.85% -3.09%
5 -5.76% -4.46% -4.61% -3.46% -2.86%
6 -2.88% -4.46% -3.69% -3.12% -2.64%
7 -4.46% -3.28% -2.95% -2.44%
8 -2.23% -3.28% -2.95% -2.26%
9 -3.28% -2.95% -2.23%
10 -3.28% -2.95% -2.23%
11 -1.64% -2.95% -2.23%
12 -2.95% -2.23%
13 -2.95% -2.23%
14 -2.95% -2.23%
15 -2.95% -2.23%
16 -1.48% -2.23%
17 -2.23%
18 -2.23%
19 -2.23%
20 -2.23%
21 -1.12%
Total 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
50.00%
0.00%
This schedule is completed by calculating the amount of depreciation each year utilizing
the special first-year bonus depreciation and then subtracting the traditional MACRS
depreciation for the comparable period. For example, in the 5-year class the first year
special depreciation rate assuming a 50% bonus rate is 60%. The standard depreciation
rate is 20%. Therefore, the difference of 40% occurs in the first year and is shown in cell
D5.

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Bonus MACRS Minus Standard MACRS Schedule (half-year convention)
IRS Property Class (Years)
Bonus depreciation is based on a first-year bonus of:
Standard MACRS is used with current bonus of:
Variable Input
Change from Base
Case to:
Output NPV
Dollar Change from
Base Case
Base Case No change $ 5,689.07 $ -
Tax rate 25% $ 3,555.67 $ (2,133.40)
Discount rate 6% $ 3,570.19 $ (2,118.88)
Asset Class 20-year $ 10,035.89 $ 4,346.82
Bonus Depreciation 30% $ 3,413.44 $ (2,275.63)
$ 2,675.33 $ (3,013.74) Change all 4 at once
Impact on Additional NPV if Base Case Variables Change
Percentage Change
from Base Case
-37.5%
Year Depreciation Tax Shield Benefit PV of Benefit
-37.2% 1 45,000.00 $ 18,000.00 $ $16,071.43
76.4% 2 (9,000.00) $ (3,600.00) $ ($2,869.90)
-40.0% 3 (7,200.00) $ (2,880.00) $ ($2,049.93)
-53.0%
4 (5,760.00) $ (2,304.00) $ ($1,464.23)
5 (4,608.00) $ (1,843.20) $ ($1,045.88)
6 (3,686.40) $ (1,474.56) $ ($747.06)
7 (3,276.80) $ (1,310.72) $ ($592.90)
8 (3,276.80) $ (1,310.72) $ ($529.38)
9 (3,276.80) $ (1,310.72) $ ($472.66)
10 (3,276.80) $ (1,310.72) $ ($422.02)
11 (1,638.40) $ (655.36) $ ($188.40)
$5,689.07
Impact on Additional NPV if Base Case Variables Change
Total Present Value of Bonus Depreciation:
Yearly Changes in Depreciation, Tax-Shield Benefit, and Present
Value (PV) of Benefit Due to Bonus Depreciation
3 5 7 10 15 20
0% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
3% 0.54% 0.99% 1.41% 2.02% 3.42% 4.38%
6% 1.01% 1.82% 2.56% 3.57% 5.77% 7.13%
9% 1.41% 2.51% 3.48% 4.76% 7.41% 8.90%
12% 1.77% 3.10% 4.24% 5.69% 8.55% 10.04%
15% 2.08% 3.59% 4.85% 6.41% 9.35% 10.77%
18% 2.35% 4.00% 5.35% 6.96% 9.91% 11.24%
21% 2.58% 4.35% 5.76% 7.39% 10.29% 11.52%
24% 2.79% 4.65% 6.09% 7.73% 10.55% 11.68%
40.00%
50.00% 6. The bonus depreciation first-year rate:
Assumptions:
1. The standard MACRS schedule is utilized with and without the bonus depreciation.
2. The discount rate used is consistent throughout the depreciable life of the asset.
3. The asset is retained for the entire depreciable time and embedded options are ignored.
4. The marginal tax rate does not change over the depreciable life of the asset.
5. The firm's marginal tax rate:
Change in NPV Relative to Depreciable Basis
Bonus Depreciation Impact: Percentage change in the asset depreciable basis given
different combinations of IRS Asset Property Class and Asset Discount Rate
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IRS Property Asset Class
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7
10
15
20
-2%
0%
2%
4%
6%
8%
10%
12%
0%
3%
6%
9%
12%
15%
18%
21%
24%
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Analysis of 50% Bonus Depreciation Impact on
NPV as Percent of the Asset's Depreciable Basis