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Depreciation | 2017 Law | What changed under TCJA | Expiring |
Temporary 100 percent expensing for certain business assets | Certain business assets, such as equipment and buildings, are depreciated over time. Bonus depreciation for equipment, computer software, and certain improvements to nonresidential real property allows an immediate deduction of 50% for equipment placed in service in 2017, 40% in 2018, and 30% in 2019. Long-lived property generally is not eligible. The phase down is delayed for certain property, including property with a long production period. | TCJA temporarily allows 100% expensing for business property acquired and placed in service after Sept. 27, 2017 and before Jan. 1, 2023. The 100% allowance generally decreases by 20% per year in taxable years beginning after 2022 and expires Jan. 1, 2027. The law now allows expensing for certain film, television, and live theatrical productions, and used qualified property with certain restrictions. For more information, see Tax Reform: Changes to Depreciation Affect Businesses Now and New 100-percent depreciation deduction for businesses. | 12/31/2025 |
Special ("Bonus" Depreciation) | A major tax incentive that allowed businesses to immediately deduct up to 50% of the cost as depreciation. | The TCJA allows businesses to deduct 100% of the cost of qualified property as a bonus depreciation. It also extended the bonus to cover more property. | 2027 (currently phasing out) |
Changes to rules for expensing depreciable business assets (section 179 property) | A taxpayer can expense the cost of qualified assets and deduct a maximum of $500,000, with a phaseout threshold of $2 million. Generally, qualified assets consist of machinery, equipment, off-the-shelf computer software and certain improvements to nonresidential real property. | TCJA increased the maximum deduction to $1 million and increased the phase-out threshold to $2.5 million. It also modifies the definition of section 179 property to allow the taxpayer to elect to include certain improvements made to nonresidential real property. Publication 946, How to Depreciate Property, and the Additional First Year Depreciation Deduction (Bonus) FAQs provide additional resources on this topic. | |
Changes to depreciation of luxury automobiles | There are limits on depreciation deductions for owners of cars, trucks and vans. | TCJA increased depreciation limits for passenger vehiclesPDF. If the taxpayer doesn’t claim bonus depreciation, the greatest allowable depreciation deduction is: $10,000 for the first year, $16,000 for the second year, $9,600 for the third year, and $5,760 for each later taxable year in the recovery period. If a taxpayer claims 100% bonus depreciation, the greatest allowable depreciation deduction is $18,000 for the first year, and the same as above for later years. | |
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