IRS Issues Updated Guidance on New Bonus Depreciation Rules.

The 2017 Tax Act was signed into law in December 2017. One of the centerpieces of the 2017 Tax Act was providing significant tax cuts and incentives for businesses. This included an expansion of the bonus depreciation rules described above to allow not just a 50% current year tax deduction for certain capital outlays by businesses, but 100%.

Bonus Depreciation. PATH extends bonus depreciation for property acquired and placed in service through 2019. The bonus depreciation percentage is 50 percent for property placed in service during 2015, 2016, and 2017, but then phases down to 40 percent in 2018 and 30 percent in 2019. Qualified Leasehold Improvement Property(QLHI).


New 100 bonus depreciation rules

Bonus Depreciation. Under the new law, there is 100% bonus depreciation for “qualified property” acquired and placed in service after September 27, 2017 and before January 1, 2023. The rates of bonus depreciation decline for tax years 2023-2026 as follows.

New 100 bonus depreciation rules

In addition, for the tax year that includes September 27, 2017, taxpayers that are otherwise eligible for 100% bonus depreciation can elect to claim 50% bonus depreciation instead. This election differs from the general “election out” provision in that this election, if made, applies to all qualified property of the taxpayer and cannot be made on a class-by-class basis.

New 100 bonus depreciation rules

Temporary 100 percent expensing for certain business assets. The new law increases the bonus depreciation percentage from 50 percent to 100 percent for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023, and is sometimes referred to as the first-year bonus depreciation.

 

New 100 bonus depreciation rules

Under the TCJA, property acquired and placed in service after Sept. 27, 2017, generally is eligible for 100% bonus depreciation. The pre-TCJA rules for 40% bonus depreciation provided that for self-constructed property, the date of acquisition generally is the date construction begins.

New 100 bonus depreciation rules

Overview. The IRS and Treasury today released final and proposed regulations on bonus depreciation under Section 168(k). Section 168(k), as amended by the 2017 tax reform act, allows taxpayers to claim 100% bonus depreciation for qualified property acquired after September 27, 2017, and placed in service through December 31, 2022.

New 100 bonus depreciation rules

The “50% bonus depreciation” was to be phased down to 40% for property placed in service in calendar year 2018, 40% in 2019 and 0% in 2020 and afterward. The new tax law for property placed in service and acquired after Sept. 27, 2017 raised the 50% rate to 100%. Additionally, the property eligible for bonus depreciation can be new or used.

New 100 bonus depreciation rules

It is important to note that the 100% bonus depreciation rule is retroactive, meaning that qualified assets acquired and placed in service after September 27, 2017 are eligible for the 100% deduction.

 

New 100 bonus depreciation rules

The TCJA allows 100% first-year bonus depreciation in Year 1 for qualifying assets placed in service between September 28, 2017, and December 31, 2022. The bonus depreciation percentage will begin to phase out in 2023, dropping 20% each year for four years until it expires at the end of 2026, absent congressional action to extend the break.

New 100 bonus depreciation rules

Bonus depreciation is only allowed on assets used 100% for business purposes. However, section 179 expensing is allowed to be used for property used 50 % or more of the time for business purposes in the same ratio as the business use percentage applied. Section 179 expensing is limited to taxable income.

New 100 bonus depreciation rules

The TCJA allows 100% first-year bonus depreciation in year 1 for qualifying assets placed in service between September 28, 2017, and December 31, 2022. The bonus depreciation percentage will begin to phase out in 2023, dropping 20% each year for four years until it expires at the end of 2026, absent congressional action to extend the break.

New 100 bonus depreciation rules

Certain taxpayers can elect to take 100% bonus depreciation on the qualified improvement property by filing an amended return, an Administrative Adjustment Request (AAR) under Sec. 6227, or a Form 3115, Application for Change in Accounting Method, to change their depreciation of QIP placed in service after Dec. 31, 2017, in the taxpayers’ 2018, 2019, or 2020 tax year. Based on your specific.

 


IRS Issues Updated Guidance on New Bonus Depreciation Rules.

The new bonus depreciation rules apply to property acquired and placed in service after September 27, 2017, and before January 1, 2023, at which time the provision expires unless Congress renews.

The 100% additional first - year depreciation deduction is also allowed for specified plants planted or grafted after Sept. 27, 2017, and before Jan. 1, 2023. The 100% additional first - year depreciation deduction is then phased down by 20% each year for five years.

Bonus Depreciation Rate Increases to 100 Percent for Qualified Assets Back it 2002, bonus depreciation allowed companies to deduct 30 percent of the cost of qualified assets. In 2003, the rate was increased to 50 percent, but legislation in 2015 included a phase-out of bonus depreciation to 40 percent in 2018 and 30 percent in 2019.

Further, the tax law introduces a new ambiguous requirement—to qualify for 100-percent bonus depreciation, “the original use” of the aircraft must begin with the taxpayer.

The CARES Act allows taxpayers to reduce their income taxes by claiming 100% bonus depreciation for “qualified improvement property” (QIP), which includes improvements made by the taxpayer to an interior portion of a nonresidential building after the date the building was placed in service.

Property of a specified type retains many of the original provisions and adds a few new categories. This section also clarifies that Qualified Improvement Property acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2018 does in fact qualify for 100% bonus depreciation as 39-year property.