Operating a business is stressful enough without considering the tax implications, but when it comes to taxes burying your head in the sand is not an option. Besides, the Tax Cuts and Job Act of 2017 introduces some perks for small business owners that you won't want to miss.
Let's talk depreciation deductions:
- Effective immediately, businesses can expense more section 179 property under the Tax Cuts and Job Act the year it is purchased and placed in service. Section 179 property includes tangible property such as buildings, equipment, machinery, vehicles, furniture, computers and software.
- The phase-out threshold has increased from $2 million to $2.5 million, and the maximum deduction allowed has doubled from $500,000 to $1,000,000. These adjustments will enable taxpayers to make a little more during the year and take a little more come time to file.
In addition to the above changes, certain improvements can also be expensed under the new law. While reviewing these changes, keep in mind that the modifications apply to property placed in service in tax years beginning after December 31, 2017.
- Improvements to non-residential property, such as roofing, fire protection systems, security systems, heating and air conditioning systems, and other “qualified improvement property” of this type made to the interior of a building can now be deducted as long as the changes occurred after the date the property was first placed into service.
- Changes to the internal structural framework of a building, service to escalator or elevators, and expansion of the building do not qualify for depreciation or deduction purposes.
Though tax topics can be intimidating, staying up to date with the current law ensures compliance and decreases the likelihood of missing out on any credits or deductions for which you may qualify.