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2017 Bonus Depreciation Update

The tax and accounting experts at bgr CPAs explain the importance of bonus depreciation for commercial and residential real estate owners.

Depreciation allows businesses to divide the cost of property into installments. Typically, businesses choose a method of depreciation that divides the cost evenly over the asset life. However, bonus depreciation methods may offer additional tax benefits for businesses who qualify.

Bonus depreciation is a method of depreciation that enables a business to make an additional deduction on the cost of qualifying property. Qualifying property has typically been defined as new equipment or tangible property that has been put into service in the same year that it was obtained. Also included is qualified improvement property which includes improvements to an interior portion of a building that is nonresidential real property. Any improvement to the building that results in an enlargement of the building; any elevator or escalator improvement; or any improvement to the internal structural framework of the building does not qualify.

On December 18, 2015, the Protecting Americans from Tax Hikes (PATH) Act of 2015 was passed by congress, effectively modifying and extending several depreciation provisions including bonus depreciation rules. The modifications to bonus depreciation rules can be beneficial for business owners. This year, 2017, is the last year a taxpayer may deduct 50% of the cost of new property and equipment in the year of purchase, and the remaining cost over the course of the property’s life. The percentage is reduced to 40% for property placed in service in 2018, 30% for property placed in service in 2019, and completely removed for property placed in service after 2019.

For additional information regarding bonus depreciation as it relates to the real estate industry, 
please contact the experienced professionals at bgr CPAs today.

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