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IRS Highlights Expanded Tax Benefits For Depreciation and Expensing

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Kristen DeazeleyKristen Deazeley

In recognition of National Small Business Week happening this month, the Internal Revenue Service is highlighting tax reform changes that impact depreciation and expensing for nearly every business. In some cases, these changes allow small business owners and the self-employed to write off the cost of machinery, equipment and other property more quickly. Here is some key information to keep in mind:

100%, First-Year "Bonus" Depreciation - The bonus depreciation percentage is now 100% for qualified property acquired and placed in service after September 27, 2017 and before January 1, 2023. This means that businesses can often write off the full cost of most depreciable property in the first year they use it in their business. Depreciable business assets with a recovery period of 20 years or less and certain other property usually qualify. This means that machinery, equipment, computers, appliances and furniture generally qualify. Special rules apply for longer production period property and certain aircraft.

Businesses Can Immediately Expense More - Businesses may elect to expense all or part of the cost of what is often referred to as Section 179 property and deduct it in the year they place the property in service. The maximum deduction is increased to $1,000,000, and the phase-out threshold is increased to $2,500,000. These amounts, adjusted annually for inflation, apply to property placed in service in tax-year 2019.

Section 179 property includes business equipment and machinery, office equipment, livestock, and if elected, qualified real property. Taxpayers can elect to include certain improvements made to nonresidential real property after the date when the property was first placed in service.

These improvements include:

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