Under prior depreciation law, taxpayers were allowed to take what is called 50% bonus depreciation for NEW qualified property that was placed in service during the year. For example, if a taxpayer bought a new vehicle worth $30k, he or she would be able to immediately expense $15,000 as bonus depreciation. The remaining $15,000 would be depreciated over the useful life of the asset.
Under the new depreciation law, the bonus depreciation has increased from a 50% deduction to a 100% deduction for 2018. This was also retroactively placed in service for property acquired after September 27, 2017. And, there is no longer a requirement that the qualified property must be new. It can be USED property but just simply needs to be NEW to the taxpayer to receive the 100% bonus depreciation deduction.
Section 179 depreciation - The Section 179 deduction has increased from $500,000 in 2017 to $1 million in 2018. Sec 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment during the year. For example, if a taxpayer purchases a $50,000 piece of equipment for his or her business, they can deduct the full purchase price from their gross income. They can also choose not to and depreciate it over the useful life of the asset. The phase-out threshold for this deduction has increased from $2 million to $2.5 million in 2018.
These are just a few changes from the Tax Cuts and Jobs Act that may impact you and your business. If you have any questions or need any additional tax planning we at Hall, Kistler & Co would be happy to help you! Give us a call at 330-453-7633 or click on my name above for assistance.