The 2018 tax law changes allow for larger deductions of some depreciable business assets in 2018. Here are some key changes to think about as the year comes to a close.
Section 179
Section 179 assets may be written off in the year they are placed in service up to an annual limit set by law. For 2018:
Bonus Depreciation
Bonus depreciation for 2018 has been increased from 50% to 100%. In other words, a taxpayer may write off the entire cost in 2018 for qualified assets purchased. There are a few limitations designed to ensure taxpayers cannot take unfair advantage of this deduction by converting property from personal to business use, moving property between business, gifting, inheriting, or purchasing from a related party. Otherwise, it's a great year for businesses to buy new assets and get a tax break.
Automobiles
The IRS has placed a limit on the amount of depreciation that may be claimed on what is termed "luxury automobiles". In the past, this limit was rather small at $3,160 (not including any bonus depreciation, which was also limited. This year, if a taxpayer doesn’t claim bonus depreciation, the greatest allowable depreciation deduction is:
$10,000 for the first year,
$16,000 for the second year,
$9,600 for the third year, and
$5,760 for each later taxable year in the recovery period.
If a taxpayer claims 100 percent bonus depreciation, the greatest allowable depreciation deduction is:
$18,000 for the first year,
$16,000 for the second year,
$9,600 for the third year, and
$5,760 for each later taxable year in the recovery period.
Listed Property
In the past, the IRS has "listed" property that has the potential to be used for personal reasons and claimed for business or be mixed use. Computers and cell phones are examples of listed property. Listed property is more closely scrutinized. Beginning in 2018, computers are no longer listed property.
Farm Machinery
Machinery used in farming used to be depreciated over 7 years. In 2018, machinery will qualify as 5 year property.
For more information:
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Section 179
Section 179 assets may be written off in the year they are placed in service up to an annual limit set by law. For 2018:
- The Section 179 expense limit has been increased to $1 million.
- Qualified improvements to nonresidential real property now qualify for Section 179 expense deduction. These include:
- HVAC
- Alarm & Security Systems
- Fire Protection Systems
- Roofs
Bonus Depreciation
Bonus depreciation for 2018 has been increased from 50% to 100%. In other words, a taxpayer may write off the entire cost in 2018 for qualified assets purchased. There are a few limitations designed to ensure taxpayers cannot take unfair advantage of this deduction by converting property from personal to business use, moving property between business, gifting, inheriting, or purchasing from a related party. Otherwise, it's a great year for businesses to buy new assets and get a tax break.
Automobiles
The IRS has placed a limit on the amount of depreciation that may be claimed on what is termed "luxury automobiles". In the past, this limit was rather small at $3,160 (not including any bonus depreciation, which was also limited. This year, if a taxpayer doesn’t claim bonus depreciation, the greatest allowable depreciation deduction is:
$10,000 for the first year,
$16,000 for the second year,
$9,600 for the third year, and
$5,760 for each later taxable year in the recovery period.
If a taxpayer claims 100 percent bonus depreciation, the greatest allowable depreciation deduction is:
$18,000 for the first year,
$16,000 for the second year,
$9,600 for the third year, and
$5,760 for each later taxable year in the recovery period.
Listed Property
In the past, the IRS has "listed" property that has the potential to be used for personal reasons and claimed for business or be mixed use. Computers and cell phones are examples of listed property. Listed property is more closely scrutinized. Beginning in 2018, computers are no longer listed property.
Farm Machinery
Machinery used in farming used to be depreciated over 7 years. In 2018, machinery will qualify as 5 year property.
For more information:
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act