Landlords and commercial property owners may want to take advantage of more favorable property depreciation rules that were part of the Tax Cut and Jobs Act, which are now in effect. The depreciation rules can be applied to most tangible property, including buildings, furniture, machinery, equipment and vehicles; but depreciation cannot be applied to land.
Some of the changes made to depreciation under the new tax law include:
- You can expense more and do it immediately. Businesses can choose to expense the cost of property and deduct it the year it is placed in service, rather than amortize the property over a number of years
- The maximum deduction has doubled to $1 million (up from $500,000)
- The phase-out limit has increased from $2 million to $2.5 million
- Certain improvements made to non-residential property can be deducted, as long as the improvements were made after the date the property was first placed in service
Qualifying improvements include:
- Changes to a building’s interior
- Roofs
- HVAC systems
- Fire protection systems
- Alarm and security systems
Improvements that do not qualify for a deduction include:
- Enlargement of a building
- Service to elevators or escalators
- Changes or improvements to the internal framework of the building
These changes apply to property placed in service in taxable years beginning after December 31, 2017.
If you have questions about the deduction of tangible property or any other tax issues, please contact our Tax Department at (781) 407-0300.