An exceedingly meaningful business incentive added by the Tax Cuts and Jobs Act, enacted on December 22, 2017 by President Trump increased the amount of qualifying fixed asset acquisition costs that may be expensed in the year of purchase from fifty (50) percent to one-hundred (100) percent. This important incentive applies to asset additions made on September 27, 2017 and before January 1, 2023.
The 100-percent depreciation deduction generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances and furniture generally qualify.
A recent news release explains that the Internal Revenue Service has now issued proposed regulations that provide guidance regarding the additional first-year bonus depreciation incentive.
The regulations are proposed to generally apply to qualified property placed in service during or after a taxpayer’s tax year that includes the date of publication of a Treasury decision adopting the rules as final regulations, with early application to qualified property acquired and placed in service after September 27, 2017 permitted.
The Tax Cuts and Jobs Act made several changes to bonus depreciation including, in part,
- the depreciation deduction percentage was increased from 50% to 100% for qualifying property;
- eligible property was expanded to include certain film, television, or live theatrical productions;
- certain used depreciable property now qualifies; and
- the election to accelerate minimum tax credits in lieu of bonus depreciation was repealed.
Taxpayers who elect out of the 100-percent depreciation deduction must do so on a timely-filed return. Those who have already filed their 2017 return and either did not claim the mandatory deduction on qualifying property, or did not elect out but still wish to do so, will need to file an amended return.
Taxpayers should take great care to ensure that they take full advantage of this incentive as the tax savings attributable thereto can be very significant. Should you have questions or comments, please contact Bob Grossman or Don Johnston.
