We’ve written extensively on the potential impacts of the new Tax Cuts and Jobs Act. While it’s true that we know your 2018 tax situation could look different compared to last year, not everyone is sure what it will look like on an individual level. If you are a business owner, you are probably doubly concerned with what the tax law means for both your business and your livelihood.
To help business owners adjust to the changes, the government is offering temporary rules or one-time tax breaks this year related to depreciation of valuable business assets like real estate and vehicles. Depreciation allows business owners to spread out the cost of an asset over its lifetime – and the new TCJA is offering depreciation bonuses. According to The Balance Small Business, bonus depreciation offers additional incentives for business owners to buy capital assets. How does this apply to your business?
The TCJA offers up to 100 percent bonus depreciation on all heavy SUVs, pickups and vans used for business through the end of 2022. This means the full cost of a vehicle that is used 50 percent or more for business can be deducted in the year you purchase it. Similar, but more limited, bonus depreciation is also available for luxury vehicles purchased.
Specific quality improvements of business real estate
Some improvements to real estate built after 2017 are eligible for a 100 percent bonus depreciation, but due to a quirky legislative oversight, this does not apply to enlargement of the building, adding an elevator or escalator or the internal structural framework, according to MarketWatch. Understanding these bonus depreciations comes with understanding the difference between a repair and “capital improvements.”
A change in strategy?
Bonus depreciation can change the tax strategy and incentives you can usually rely on. This change can be useful, but you must be prepared. According to a recent study, just one-third of business owners said they were ready for the changes provided by the TCJA. Awareness of and planning for bonus depreciation is one way you can be prepared for tax changes.
Are you prepared to take advantage of bonus depreciation? Take proactive steps in tax planning for your business by speaking with an experienced tax attorney at Goldburd McCone LLP. With 35 years of experience, we understand how to adapt your business as tax laws change.