The Protecting American From Tax Hikes (PATH) Act of 2015 extended bonus depreciation for property acquired and placed in service during 2015 through 2019 (with an additional year for certain property). Bonus depreciation is 50% for property placed in service in 2015 through 2017. It phases down to 40% in 2018 and 30% in 2019.
For qualified property placed in service before January 1, 2016, bonus depreciation is available for if it meets the following requirements:
- Its original use must begin with the taxpayer;
- It was acquired by the taxpayer after December 31, 2007, but before January 1, 2016 (a written binding contract could not have been in effect before January 1, 2008);
- It is new modified accelerated cost recovery system (MACRS) property with a recovery period of 20 years or less, computer software, water utility property, or qualified leasehold improvement property (QLHI);
- It’s placed in service before January 1, 2016.
Bonus depreciation is available for qualified property placed in service after December 31, 2015 and before January 1, 2020.
Beginning in 2016, qualified improvement property replaced qualified leasehold improvement property for bonus depreciation purposes. Qualified improvement property incudes improvements to the interior of a building that is nonresidential real property (placed in service after the date the building was first placed in service), except:
- Elevators or escalators
- Internal structural framework
Bonus depreciation is not available for used property, property used outside of the U.S., or tax-exempt use or financed property.
Taxpayers can elect to use AMT credits instead of bonus depreciation under special rules for property placed in service in 2015. This provision modifies the AMT rules beginning in 2016 by increasing the amount of unused AMT credits that can be claimed.
Contact either Michael Sexton, CPA, CCIFP, Director – Tax Services at Michael.Sexton@MCC-CPAs.com or me at Marty.McCarthy@MCC-CPAs.com to learn if you can benefit. We are here to help you save money on your taxes.