Tax FAQ Series: What is the impact of the new bonus depreciation rules under the Tax Cuts and Jobs Act?

Under the new Tax Cuts and Jobs Act (effective for the 2018 tax year) the bonus depreciation rules have been loosened. Among other things, the change allows for 100% bonus depreciation for assets placed in service between September 27, 2017 and January 1, 2023. These include all vehicles and most other assets with an “asset life” (the depreciable life of the asset) of 20 years or less. For example, if you purchased an auto for $50,000 on January 1, 2018 and used it for business purposes, you could use the normal depreciation life of 5 years and deduct $10,000 each year for five years as depreciation expense. Or you could apply the new bonus option and deduct the entire purchase price ($50,000) in the first year of use.

Here’s a link to the IRS website showing more detail: https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act.

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