IRS Qualifies New Bonus Depreciation Rules

Phil Jelsma

This month, the IRS has proposed new regulations on additional first-year depreciation deductions, or bonus depreciation. The new regulations outline the qualifications and instructions for bonus depreciation, which was expanded under the new tax plan. This is the first of three sets of proposed regulations the IRS will suggest to implement the changes from the new tax plan.

“While first-year bonus deprecation has been around for many years, the Tax Cuts and Jobs Act made this break a bit more generous. Enacted in January of this year, the new tax bill generally provides that, for assets with a recovery period of 20 years or less, a taxpayer could elect to deduct 100%, previously the rate was 50% and only applied to new property,” Phil Jelsma, a partner and chair of the tax practice team at San Diego-based commercial real estate law firm Crosbie Gliner Schiffman Southard & Swanson LLP, tells GlobeSt.com. “Now, bonus depreciation applies to both new and used property used in a trade or business if placed in service after September 27, 2017 and before January 1, 2023. This generally includes all personal property, computer software and certain leasehold improvements as well as some real property improvements.”