New Rules Emerge Guiding Bonus Depreciation

Bruce A. Willey is a respected presence in the Cedar Rapids, Iowa, business community who guides the Willey Law Firm, PC. The firm enables clients to maximize their revenues and minimize tax obligations. Bruce A. Willey focuses on new tax laws and regulations that impact small business owners in Iowa. 

As reported in Entrepreneur, one tax law that came into effect in 2017 centers on Section 179, bonus depreciation and expensing. Under the expensing provision, capital investments of up to half a million dollars for certain properties can be claimed as expense deductions instead of as depreciated breaks. Made permanent in 2015 with the PATH Act, the bonus depreciation provision does not apply when asset purchases exceed $2 million. 

With the new rules in place, HVAC units undertaken after December 31, 2015, are eligible as an expense deduction. Another aspect of the bonus depreciation provision is that additional depreciation can be claimed on property during the first year of the recovery period as long as it is put into use between 2015 and 2019.

The bonus depreciation is 50 percent for 2015, 2016, and 2017, while in 2018, this drops to 40 percent and in 2019 to 30 percent. This means that businesses may want to look at placing newly purchased, up-to-date equipment in service in 2017 rather than waiting until 2018 or beyond.