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The Tax Reform: How Depreciation will Affect Businesses

July 31, 2018


There is no secret that there are a lot  of changes coming due to the Tax Cuts and Jobs Act . One of these changes may affect businesses depreciation deductions and taxes.


Businesses can generally depreciate tangible property except land, such as buildings, machinery, vehicles, furniture and equipment.


Here is how changes to depreciation will affect businesses:


•Businesses can immediately expense more under the new law; you may elect to expense the cost of any property and deduct it in the year the property is placed in service.


•Maximum deduction increased from $500,000 to $1 million.


•The phase-out threshold increased from $2 million to $2.5 million.


•The new law allows businesses to elect to include improvements made to nonresidential property. The improvements must have been made after the date the property was first placed in service.



These improvements include: 


  • Any improvement to a building’s interior

  • Roofs

  • Heating and air conditioning systems

  • Fire protection systems

  • Alarm and security systems


Improvements that do not qualify:


  • Enlargement of the building

  • Service to elevators or escalators

  • Internal structural framework of the building


These changes apply to property placed in service in taxable years after December 31, 2017.