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The Tax Cuts and Jobs Act (“TCJA”) changed the way business can recover their costs for the acquisition of qualified property. This was done by changing to regulations in the Internal Revenue Code (“IRC”):
- “Bonus Depreciation”
- “Sec 179 Expense”
Bonus Depreciation
Pre-TCJA laws permitted a depreciation deduction for qualified property placed in service during the tax year equal to 50% of the adjusted basis of qualified property. Under the TCJA the 50% bonus depreciation is temporarily increased to 100% bonus depreciation.
The additional first-year depreciation deduction is allowed for “new” or “used” property. Under Pre-TCJA it was only available for “new” property.
Sec 179 Expense
Under Pre-TJCA, a taxpayer’s annual limitation for Code Sec. 179 expenses was $500,000. This would phase out by the amount the cost of section 179 property placed in service by the taxpayer during the tax year exceeded $2M.
The TCJA raises the pre-inflation-adjusted annual dollar limit from $500,000 to $1 million and the threshold for the phase-down would increase from $2M to $2.5M.
Are you taking advantage of these changes? Contact us to assure that you are getting the most out of your capital expenditures.