2018 Changes to Depreciation Expense

With the passing of the Tax Cuts and Jobs Act, there are numerous changes to traditional tax law and the 2018 tax return season will be quite a bit different compared to previous years. The Tax Cuts and Jobs Act will provide a significant boost to both depreciation expense and Section 179 depreciation which are beneficial to taxpayers. Here is a quick summary of some of the changes to depreciation expense set to take place in 2018.

  • Previously taxpayers were able to take bonus depreciation of 50% on any purchases of fixed assets including furniture, fixtures, computers, land improvements and machinery. Starting September 27, 2017, taxpayers can take 100% bonus depreciation on the same fixed assets. 100% bonus depreciation is effective through December 31, 2022 at which point it will then be reduced annually by 20% until it is phased out on January 1, 2017.
  • Section 179 expense is also changing to the benefit of taxpayers. Previously, taxpayers could fully expense the cost of fixed asset purchases up to $500,000 to the extent of their net business income. Additionally, the $500,000 was reduces once qualifying purchases exceeded $2,000,000 each year. The acquisition amount eligible for Section 179 increases in 2018 from $500,000 to $1,000,000 and the $2,000,000 cap increases to $2,500,000.

These changes will allow companies greater financial flexibility in terms of acquiring fixed assets. Yearend tax planning is very important to ensure that you are taking advantage of these beneficial tax changes, so it is worthwhile to discuss your tax situation with a CPA. Give us a call at 847-827-8100 or check http://www.gurdakgroup.com/ if you’d like to discuss your situation in more detail.