Depreciation: A key benefit of tax reform for SMBs


Tax reform and your business: The experts weigh in

Since the passing of the tax reform last year, business leaders as well as tax and legal professionals have worked to understand the nuances of the new legislation. Some changes are especially impactful to small and midsize businesses (SMBs), so we enlisted three tax experts to answer frequently asked questions in our webinar Tax Reform: Key Considerations for SMBs. Learn the perspectives of the experts Robert Tobey, CPA, Managing Director of CBIZ, Len Nitti, CPA, MST, Principal at Wilkin & Guttenplan and Andy Ben-Ami, Partner of the Tax Practice Group of Tarter Krinsky & Drogin.

Watch the webinar Tax Reform Key Considerations for SMBs

One opportunity for small firms is the expansion of Section 179.  Tobey and Nitti shared their thoughts on the advantages of this expansion for SMBs.

Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. According to Tobey, “Section 179, combined with bonus depreciation, and  the repair regulations, are a really strong planning tool going into 2018 because of the types of property that now qualify for each type of write-off, whether it’s bonus or whether it’s Section 179.”

Nitti added that Section 179 is “an accelerated depreciation method where businesses can immediately write off 100% fixed asset additions, assuming certain limitations were met. For 2017, deductions are capped at $500,000 of qualifying items; for 2018 the deduction increases to $1 million.”

Improvements now qualify

In addition to expanding the deduction amount, Tobey confirmed that a big benefit to SMBs is that what qualifies for deduction has also changed. “Historically, deductions have been limited to items including equipment, furniture, certain types of leasehold improvements, restaurant improvements,” he said. “In 2018 the acceptable deductions under Section 179 are expanded to include qualified property improvements, or, improvements to the interior of the real estate where business is operated. Areas that were previously excluded that will now qualify as deductions include roof replacements, HVAC systems, and security and fire systems.”

Nitti noted there are a few exclusions. “Interior improvements relating to the enlargement or a structural component of a building will not qualify, nor will investments related to an escalator or elevator,” he said.

Qualified improvements equal additional savings

In all, this is great news for SMBs that plan to make capital improvement expenditures. In the Q4 2017 Vistage CEO Confidence Index survey, 54% of SMB CEOs surveyed indicated they plan to increase their fixed investments in the next 12 months. These investments may be eligible for new deductions, which will result in more savings for your company.

 

 

 

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