IRS issues proposed regs. on 100% bonus depreciation

by | Dec 1, 2018 | Best Business Helps | 0 comments

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IRS issues proposed regs. on 100% bonus depreciation

The IRS issued proposed regulations providing guidance on Sec. 168(k), which was amended by P.L. 11597, known as the Tax Cuts and Jobs Act (TCJA), to increase the allowable firstyear depreciation deduction for qualified property from 50% to 100%.

The TCJA extended and modified bonus depreciation, allowing businesses to immediately deduct 100% of the cost of eligible property in the year it is placed in service, through 2022. The amount of allowable bonus depreciation is then phased down over four years: 80% will be allowed for property placed in service in 2023, 60% in 2024, 40% in 2025, and 20% in 2026. (For certain property with long production periods, the above dates will be pushed out a year.)

The TCJA also removed the rule that made bonus depreciation available only for new property and extended the period in which certain other property (including plants and films, television, and live theatrical productions) will qualify for 100% depreciation. These new rules generally apply retroactively to property acquired or placed in service after Sept. 27, 2017.

The proposed regulations describe and clarify the statutory requirements that must be met for depreciable property to qualify for the additional firstyear depreciation deduction provided by Sec. 168(k). Further, the proposed regulations instruct taxpayers how to determine the additional firstyear depreciation deduction and the amount of depreciation otherwise allowable for this property. Because the TCJA substantially amended Sec. 168(k), the proposed regulations update existing regulations in Regs. Sec. 1.168(k)-1 by providing a new section at Prop. Regs. Sec. 1.168(k)-2 for property acquired and placed in service after Sept. 27, 2017, and make conforming amendments to the existing regulations.

Following amended Sec. 168(k)(2), the proposed regulations provide that depreciable property must meet four requirements to be qualified property:

Although the IRS said the regulations would apply to qualified property placed in service (or planted or grafted) during or after the taxpayer’s tax year that includes the date the regulations are published as final in the Federal Register, it also is allowing taxpayers to rely on the proposed rules for property placed in service or planted or grafted after Sept. 27, 2017, by the taxpayer during tax years ending on or after Sept. 28, 2017.

— By Sally P. Schreiber, J.D., a JofA senior editor.

Research & References of IRS issues proposed regs. on 100% bonus depreciation|A&C Accounting And Tax Services
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