Depreciation Breakdown

    Ashley Constable
    Staff Accountant

    Christmas is right around the corner and so is the end of the 2018 tax year. Along with purchasing gifts for friends and family, this is also a time when business owners purchase items for their company. This time of year, businesses have an idea of where their net income stands, making this the perfect time to buy necessary equipment for the business if their net income is high.

    The Tax Cuts and Jobs Act of 2017 has new regulations for utilizing more depreciation than in previous years. This allows business owners to purchase equipment and take advantage of writing off more depreciation in the year purchased.

    Section 179

    The Tax Cuts and Jobs Act increased Section 179 property deductions from $500,000 to $1 million and increased the phase out threshold from $2 million to $2.5 million. Section 179 property now includes the following improvements to nonresidential real property:

       • Qualified improvement property: this includes all improvements to a building’s interior except for the following:
             o Enlargement of the building
             o Elevators and escalators
             o Internal structural framework of the building
       • Roofs, HVAC, fire protection systems, alarm and security systems

    Bonus Depreciation

    Bonus depreciation increased from 50% to 100% for qualified property. It is important to note that bonus depreciation now includes used equipment, if the equipment is “new” to the business owner.

    Depreciation changes for Vehicles
    • • $18,000 for the first year
    • • $16,000 for the second year
    • • $9,600 for the third year
    • • $5,760 for each remaining depreciable year

    If bonus depreciation is not utilized in the first year, the greatest allowable deduction is $10,000 for the first year, with the remaining years following the same allowable deductions as above.

    For SUV’s over 6,000 pounds but under 14,000 pounds, there is a $25,000 limit for Section 179 and no limit for bonus depreciation in the first year. There are no limitations for the following tax years.

    Trucks over 14,000 pounds have no limits for depreciation for any depreciable tax year.

    The Tax Cuts and Jobs Act’s changes for depreciation allow greater deductions in the year of purchase. Please contact a member of our team if you have any questions.