First-year Bonus Depreciation: Temporary 100 percent expensing for certain business assets

The new law increases the bonus depreciation percentage from 50 percent to 100 percent for qualified property acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023. The bonus depreciation percentage for qualified property that a taxpayer acquired before Sept. 28, 2017, and placed in service before Jan. 1, 2018, remains at 50 percent. Special rules apply for longer production period property and certain aircraft.

The definition of property eligible for 100 percent bonus depreciation was expanded to include used qualified property acquired and placed in service after Sept. 27, 2017, if all the following factors apply:

The taxpayer didn’t use the property at any time before acquiring it.

The taxpayer didn’t acquire the property from a related party.

The taxpayer didn’t acquire the property from a component member of a controlled group of corporations.

The taxpayer’s basis of the used property is not figured in whole or in part by reference to the adjusted basis of the property in the hands of the seller or transferor.

The taxpayer’s basis of the used property is not figured under the provision for deciding basis of property acquired from a decedent.

Also, the cost of the used qualified property eligible for bonus depreciation doesn’t include any carryover basis of the property, for example in a like-kind exchange or involuntary conversion.

The new law added qualified film, television and live theatrical productions as types of qualified property that are eligible for 100 percent bonus depreciation. This provision applies to property acquired and placed in service after Sept. 27, 2017.

Under the new law, certain types of property are not eligible for bonus depreciation. One such exclusion from qualified property is for property primarily used in the trade or business of the furnishing or sale of:

Electrical energy, water or sewage disposal services,

Gas or steam through a local distribution system or

Transportation of gas or steam by pipeline.

This exclusion applies if the rates for the furnishing or sale have to be approved by a federal, state or local government agency, a public service or public utility commission, or an electric cooperative.

The new law also adds an exclusion for any property used in a trade or business that has floor-plan financing. Floor-plan financing is secured by motor vehicle inventory that a business sells or leases to retail customers.

The Tax Cuts and Jobs Act of 2017 represents the most significant changes in tax law in over 30 years!  When was the last time your CPA or tax preparer offered you tax strategies to help you be more prosperous in your business?  Give us a call today at 636-394-5524 and let us help guide you through the complexities of these new rules.

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