Tax Act May Affect Small Business Depreciation Deduction*

Tax Act May Affect Small Business Depreciation Deduction*

The passage late last year of the Tax Cuts and Jobs Act may lessen the tax load on small business by expanding deduction allowances, the IRS states.

Tax deductions on depreciation increased, which means small business owners may see their taxes decline.

Businesses are allowed to depreciate “tangible property except land, including buildings, machinery, vehicles, furniture and equipment.”

Highlights include:

• The act increases the number of items businesses may list as expenses, which includes the cost of any business property. Businesses may deduct the property in the year it is put in service.
• The maximum deduction rose from $500,000 to $1 million.
• The phase-out threshold went from $2 million to $2.5 million.
• Taxpayers may choose to include improvements made to nonresidential property. The improvements must have been made after the property was initially put in service.
  • A building’s interior
  • A roof
  • Heating and air conditioning systems
  • Fire protection systems
  • Alarm and security systems

These improvements do not qualify:

• Building enlargement
• Elevator or escalator service
• The building’s internal structure framework

These changes apply on property put into use after December 31, 2017.

Other details may apply, and you can find more information on the IRS website.

*This information is not intended to be a substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax advisor.

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[i] https://www.irs.gov/newsroom/tax-reform-changes-to-depreciation-affect-businesses-now