Depreciation Rules


Section 179 Rules

Maximum 2023 Section 179 deduction is $1,160,000 and the phaseout amount is $2,890,000

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 and before 12-31-22. After 12-31-22, the bonus depreciation percentage is reduced until it is phased-out after the end of 2026. For 2022, 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