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The TCJA temporarily expands bonus depreciation

The TCJA temporarily expands bonus depreciation

The Tax Cuts and Jobs Act (TCJA) enhances some tax breaks for businesses while reducing or eliminating others. One break it enhances — temporarily — is bonus depreciation. While most TCJA provisions go into effect for the 2018 tax year, you might be able to benefit from the bonus depreciation enhancements when you file your 2017 tax return.

Pre-TCJA bonus depreciation

Under pre-TCJA law, for qualified new assets that your business placed in service in 2017, you can claim a 50% first-year bonus depreciation deduction. Used assets don’t qualify. This tax break is available for the cost of new computer systems, purchased software, vehicles, machinery, equipment, office furniture, etc.

In addition, 50% bonus depreciation can be claimed for qualified improvement property, which means any qualified improvement to the interior portion of a nonresidential building if the improvement is placed in service after the date the building is placed in service. But qualified improvement costs don’t include expenditures for the enlargement of a building, an elevator or escalator, or the internal structural framework of a building. (more…)

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Tax Cuts and Jobs Act: Key provisions affecting businesses

Tax Cuts and Jobs Act: Key provisions affecting businesses

The recently passed tax reform bill, commonly referred to as the “Tax Cuts and Jobs Act” (TCJA), is the most expansive federal tax legislation since 1986. It includes a multitude of provisions that will have a major impact on businesses.

Here’s a look at some of the most significant changes. They generally apply to tax years beginningafter December 31, 2017, except where noted.

  • Replacement of graduated corporate tax rates ranging from 15% to 35% with a flat corporate rate of 21%
  • Repeal of the 20% corporate alternative minimum tax (AMT)
  • New 20% qualified business income deduction for owners of flow-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships — through 2025
  • Doubling of bonus depreciation to 100% and expansion of qualified assets to include used assets — effective for assets acquired and placed in service after September 27, 2017, and before January 1, 2023
  • Doubling of the Section 179 expensing limit to$1 million and an increase of the expensing phaseout thresh
    old to $2.5 million (more…)

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How to maximize deductions for business real estate

How to maximize deductions for business real estate

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Currently, a valuable income tax deduction related to real estate is for depreciation, but the depreciation period for such property is long and land itself isn’t depreciable. Whether real estate is occupied by your business or rented out, here’s how you can maximize your deductions.

Segregate personal property from buildings

Generally, buildings and improvements to them must be depreciated over 39 years (27.5 years for residential rental real estate and certain other types of buildings or improvements). But personal property, such as furniture and equipment, generally can be depreciated over much shorter periods. Plus, for the tax year such assets are acquired and put into service, they may qualify for 50% bonus depreciation or Section 179 expensing (up to $510,000 for 2017, subject to a phaseout if total asset acquisitions for the tax year exceed $2.03 million).

If you can identify and document the items that are personal property, the depreciation deductions for those items generally can be taken more quickly. In some cases, items you’d expect to be considered parts of the building actually can qualify as personal property. For example, depending on the circumstances, lighting, wall and floor coverings, and even plumbing and electrical systems, may qualify.

Carve out improvements from land

As noted above, the cost of land isn’t depreciable. But the cost of improvements to land is depreciable. Separating out land improvement costs from the land itself by identifying and documenting those improvements can provide depreciation deductions. Common examples include landscaping, roads, and, in some cases, grading and clearing. (more…)

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Minimize inventory, services to make your financials shine
Close up business woman signing documents.

Minimize inventory, services to make your financials shine

Your business financials — where they stand currently and where they might be going next year — are incredibly important. Obviously, sales and expenses play enormous roles in the strength of your position. But a fundamental and often-overlooked way of making your cash flow statement shine is to minimize inventory or services so you have just enough to fulfill demand.

Sprucing up

Carrying too much inventory can devastate a budget as the value of the surplus items drops throughout the year. In turn, your financial statements simply won’t look as good as they could. Taking stock and perhaps cutting back on excess inventory:

  • Reduces interest and storage costs,
  • Improves your ability to prevent fraud and theft, and
  • Increases your capacity to track what’s in stock.

One item to perhaps budget for here: upgraded inventory tracking and ordering software. Newer applications can help you better forecast demand, minimize overstocking, and even share data with suppliers to improve accuracy and efficiency. (more…)

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