Tax Tip: Depreciation, Farm & Ranch Depreciation, New Rules for Improving Commercial Property
The Tax Cuts and Jobs Act of 2017 improved the amount of depreciation businesses will be allowed in the year assets are purchased. The section 179 limit is increased to $1,000,000 and bonus depreciation has been increased to 100%.These changes will allow a business to be able to deduct almost any item of personal property and some real property in the year of purchase, if it is beneficial for the taxpayer. Perhaps there has never been a better time to invest in your business.
Depreciation for Farmers and Ranchers
The Tax Cuts and Jobs Act of 2017 made some improvements for farmers and ranchers buying equipment in 2018. New farm equipment other than grain bins, fences and other land improvements purchased is depreciated over 5 years instead of 7 years. Use equipment purchased in 2018 is still depreciated over 7 years.
New Tax Rules for Improving Commercial Property
The Tax Cuts and Jobs Act of 2017 improved upon rules related to depreciating commercial property. Qualified Improvement Property is defined as any improvement to an interior portion of a building that is nonresidential real property as long as the improvement is placed in service after the building was first placed in service by any taxpayer with a few exclusions. These items are depreciable over 15 years. However, they are still eligible for Section 179 expensing. Also added to allowable section 179 assets is Qualified Real Property which is defined as improvements to non-residential real property systems such as the roof, heating, ventilation, air conditions, fire protection, alarm and security systems. This is a great incentive to perform remodeling projects which you may have been putting off.
As always, consult with your tax professional at Ketel Thorstenson about these or other tax matters because each situation is different. Don’t navigate the difficult and ever changing tax codes and legislation on your own. Ketel Thorstenson CPAs and tax professionals receive advanced training and continuing education all year long to keep our service on the forefront of the tax industry. Call us today for guidance on tax planning, tax return preparation, and/or Tax Reform (the Tax Cuts and Jobs Act) affects or questions.