The 2017 tax reform reconciliation act (the Act), enacted December 22, 2017, makes substantial changes to the US federal income tax rules for depreciation. One of the most substantial changes allows taxpayers to expense 100 percent of the cost of certain qualified property acquired after September 27, 2017, and placed in service through December 31, 2022. Previously, taxpayers generally could claim only 50-percent bonus depreciation for qualified property placed in service through the end of 2017, with phase-downs to 40 percent and 30 percent for qualified property placed in service in 2018 and 2019, respectively.
In addition to a detailed discussion of the shift to 100-percent bonus depreciation, this Insight addresses other depreciation provisions of the Act that taxpayers should consider when acquiring tangible depreciable property, including changes to the definition of qualified property and the recovery periods of certain real property.
The Act represents the most comprehensive US tax reform enacted since the Tax Reform Act of 1986, and makes substantial changes to the treatment of depreciable property. Given the complex nature of these provisions and the uncertainties of application discussed above, taxpayers should remain engaged as Treasury and the IRS begin the regulatory process to implement the legislation and address some or all of these uncertainties.