For many business owners, accelerated depreciation is not an unknown concept but it may be hard to fully understand without the help of an attorney or CPA. However, gaining a simple understanding of the different ways your business can take advantage of accelerated depreciation not only helps your company save money in the short term but also helps you plan for future investments as well.
What is Accelerated Depreciation?
It’s known that the depreciation of an item or property is defined as the decrease in its value over time-based on the useful life of the item or property. When these purchases are accelerated, however, your business is able to obtain most of the expense of the asset in the first years it’s used.
Two of the most common ways that business owners can take advantage of accelerated depreciation are through bonus depreciation and cost segregation studies. Some of the main groups of people to benefit from this are commercial real estate owners and investors.
Maximize Your Tax Saving With Bonus Depreciation
In 2017, due to the 2017 Tax Cuts and Job Act, bonus depreciation was increased from 50% to 100% for business owners. The act also allowed for used property, not only newly constructed or original buildings, to benefit from this bonus depreciation.
Real estate owners and investors can benefit from bonus depreciation as long as the property was acquired after September 27th, 2017. The act also states that properties under $1 million can take advantage of bonus depreciation. In order to determine what costs qualify for 100% bonus depreciation, a cost segregation study will need to be performed by a team of engineers.
Immediate First-Year Deductions
Bonus depreciation allows a business to take an immediate first-year deduction on the purchase of eligible business properties. Under the 2017 law, bonus depreciation has increased from 50% to 100% for assets with a modified accelerated cost recovery system life of 20 years or less. Our team of tax experts and engineers are able to immediately write off assets depreciated under 20 years, thus increasing cash flow.
Gain Additional Property Write-Offs
The expansion of qualifying properties also includes features such as roofs, HVAC systems, fire protection, alarm systems, security systems, etc.
The allowable expense of these properties was increased to $1,000,000 and can include personal property that has been acquired for rental properties, furniture, and appliances. This would require a cost segregation study to identify all qualifying assets and determine the ability to use bonus depreciation provisions.
Talk To Our Team About Next Steps
Letting a team of tax specialists who worked closely with engineers and other professionals to help conduct the studies and paperwork needed would be the most efficient next step. Call our team at National Tax Group at (561) 257-3436 and set up your initial assessment to determine how your assets or property can qualify for bonus depreciation.