A revenue procedure (Rev Proc. 17-33) was released on April 20, 2017 by the Internal Revenue Service that offers taxpayers additional guidance on the Protecting Americans from Tax Hikes Act of 2015 (the “PATH Act”). This revenue procedure includes several amendments to depreciation expensing. In the PATH Act there were retroactive and permanent changes made to the rules for expensing of Section 179 property, a decrease to the life for qualified leasehold improvements, and changes to amount allowed for bonus depreciation expense in first-year.
Section 124 of the PATH Act includes the extension and modification of increased expensing limitations and treatment of certain real property as section 179 property. The 179 depreciation rules have now been permanently extended to allow expensing for computer software and certain qualified real property. Under this provision of the PATH Act, heating units and air conditioning units placed in service after 2015 are eligible for Section 179 deductions. The PATH Act retroactively extended the amount a small business taxpayer could deduct for the purchase of 179 Assets from their taxable profits from $25,000 to $500,000. The Act also made these higher amounts permanent and starting in 2016 is now indexing the amounts for inflation.
Section 123 of the PATH Act now includes a retroactive and permanent allowance for a 15 year write off for qualified leasehold improvements, qualified retail improvements, and qualified restaurant property.
Section 143 of the PATH Act includes the extension and modification of bonus depreciation deductions for property placed in service from 2015 through 2019. The bonus depreciation deduction percentage is 50 percent for property placed in service during 2015, 2016, and 2017. The bonus depreciation expense is then phased down to 40 percent for 2018 and phased down to 30 percent for 2019. The provision also modifies bonus depreciation expense to include qualified improvement to be eligible for bonus.
Contact the experienced staff at Tobin & Collins today to learn more about the PATH Act and how it applies to your business and taxes.