Updated IRS Regulations for Bonus Depreciation

Tax Alert – The Treasury Department and the Internal Revenue Service on September 13 released final regulations and additional proposed regulations under section 168(k) of the Internal Revenue Code on the new 100% additional first year depreciation deduction that allows businesses to write off most depreciable business assets in the year they are placed in service by the business.

The final regulations finalize the proposed regulations issued in August 2018 which implement several provisions included in the Tax Cuts and Jobs Act (TCJA). The proposed regulations contain new provisions not addressed previously.

The 100% additional first-year depreciation deduction generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances and furniture generally qualify.

The deduction applies to qualifying property acquired and placed in service after September 27, 2017. The final regulations provide clarifying guidance on the requirements that must be met for property to qualify for the deduction, including used property. The final regulations also provide rules for qualified film, television and live theatrical productions.

Additionally, in the proposed regulations, the Treasury Department and IRS propose rules regarding (i) certain property not eligible for the additional first-year depreciation deduction, (ii) a de minimis use rule for determining whether a taxpayer previously used property; (iii) components acquired after Sept. 27, 2017, of larger property for which construction began before Sept. 28, 2017; and (iv) other aspects not dealt with in the previous August 2018 proposed regulations. The proposed regulations also withdraw and repropose rules regarding application of the used property acquisition requirements (i) to consolidated groups, and (ii) to a series of related transactions.

We will be following these developments closely. If you have any questions on these updates, please consult your ALL tax advisor or contact us below.

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ALL CPAs is a full-service certified public accounting and business advisory firm located in Chestnut Hill, MA. We specialize in tailoring services to suit the needs of individuals and their families, closely held businesses, business owners and entrepreneurs as well as high net worth clients and nonprofit organizations. In addition to our accounting, audit and tax services, ALL has a niche in business valuation, and provides valuable ideas and assistance in the areas of business consulting, estates, trust and financial planning, personal financial administration and strategic growth management and consulting.

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