Under the new tax law, businesses can write off the entire cost of qualifying assets that they buy and place in service after Sept. 27, 2017. This break generally lasts through 2022 and then phases out 20% for each year thereafter before expiring in 2027.
The break applies to new and used asset purchases with lives of 20 years or less. The cost of qualified film, television or live theatrical productions is eligible, too.
New IRS guidance fills in some holes that the legislation left unanswered, including steps for firms that want to opt out of the 100% depreciation deduction, requirements for used property to qualify for the break and special partnership rules.
The bonus depreciation proposed rules don’t fix a technical glitch in the law.
It involves depreciation for restaurant, retail and leasehold improvements, which are now consolidated under the grouping of qualified improvement property.
Congressional Republicans fully intended to give QIP a 15-year depreciable life and to make it eligible for 100% bonus depreciation. But the statutory language
doesn’t reflect this intent, accidentally making QIP ineligible for bonus depreciation. Under IRS’s proposed rules, QIP acquired and placed in service between Sept. 27, 2017, and Jan. 1, 2018, gets 100% bonus depreciation, but later-acquired QIP does not.
A legislative correction is necessary. But that won’t happen anytime soon.
Want to read the new tax legislation and find out about all the changes?
IRS has a web page with links to the law, FAQs, legal guidance and more.
The site is updated regularly. See www.irs.gov/newsroom/tax-reform for the details