Changes to Depreciation Are Affecting Businesses Now

The IRS wants to remind businesses that the passage of the Tax Cuts and Jobs Act may affect their depreciation deductions and taxes.

Business taxpayers can generally depreciate tangible property except land, including buildings, machinery, vehicles, furniture and equipment.

Changes to depreciation and how they will affect businesses could include:

  • Businesses can immediately expense more under the new law; taxpayers may elect to expense the cost of any property and deduct it in the year the property is placed in service.
  • Maximum deduction is increased from $500,000 to $1 million.

The phase-out threshold increases from $2 million to $2.5 million.The new law allows taxpayers to elect to include improvements made to nonresidential property. The improvements must have been made after the date the property was first placed in service. These improvements include: 

  • Any improvement to a building’s interior
  • Roofs
  • Heating and air conditioning systems
  • Fire protection systems
  • Alarm and security systems

Improvements that do not qualify include enlargement of buildings, service to elevators or escalators, and internal structural framework of the building, to name a few. 

These changes apply to property placed in service in taxable years beginning after December 31, 2017.

Need more information about how the new tax laws will change how you do business? Contact the tax experts at Carpenter, Evert and Associates for help.

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