Depreciation Rules

DEPRECIATION RULES

New Section 179 Rules

Increased Section 179 deduction to $1,000,000 (up from $520,000 in 2017).  The new phaseout amount is $2,500,000

Personal property (Appliances and Furniture) on rental property is now eligible for Section 179 deduction

Specific improvements to non-residential real property after said non-residential property was placed in service are now eligible for deduction.  This means replacement items are now eligible for Section 179 deduction but not the initial items.  Specific improvements include Roofs; HVAC systems or parts thereof; Fire protection and alarm systems; and Security systems

Qualified Improvement Property (QIP) is eligible for Section 179 treatment. QIP replaces what was formerly known as Qualified Leasehold Improvement Property, Qualified Retail Improvement Property, and Qualified Restaurant Property. QIP is any improvement to an interior portion of a building which is non-residential real property if the improvement is placed in service after the date such building was first placed in service.  Please note that some improvements are excluded from QIP eligibility and they are enlargement of the building, elevator or escalator improvement or replacement, or interior structural framework.

New Bonus Depreciation Rules

100% first-year deduction is allowed on property acquired and placed in service after 9-27-17.  Taxpayer can elect 50% bonus depreciation (instead of 100%)

First-year depreciation is now allowed for both new and used property if:

1. Taxpayer did not use the property before acquiring it.  For example, taxpayer leased property first, then bought property.

2. Taxpayer did not acquire property from related party. For example, child did not buy equipment from parent.

Qualified property generally has useful life of less than 20 years