Optima Tax Relief reviews the latest release from the IRS regarding first year depreciation deduction updates 

Business owners should take note of Optima Tax Relief’s review of the latest proposed and finalized tax law regulations released this month by the IRS. The updates to these regulations relate to the new 100% additional first year depreciation deduction, which allows for additional write offs that many businesses may be eligible to take advantage of.

Once the new regulation updates go into place, following their publishing in the Federal Register, they will officially mark a series of new available business-tax write offs for depreciable business assets in the same year these assets are purchased and utilized by the business. These updates were originally submitted as part of the Tax Cuts and Jobs Act, which was created in 2018, and marks the single largest body of tax law changes in over 30 years.

Any existing and active businesses that purchase and utilize equipment, computers, appliances, furniture and machinery may be able to qualify these purchases for up to 100% depreciation in the first year as part of the update to these regulations. This 100% additional first year depreciation deduction generally applies to depreciable business assets with a recovery period of 20 years or less. Businesses may elect out of the 100% depreciation deduction, but only have 6 months from the date of filing to update their tax return to reflect that option.

According to the official filing documents, the IRS defines the depreciation deduction allowance in Section 167(a) as “a reasonable allowance for the exhaustion, wear and tear, and obsolescence of property used in a trade or business or of property held for the production of income.”

This month, the IRS and the Treasury Department released its final regulations, as well as newly proposed regulations, regarding the new 100% first year depreciation deduction for businesses. These new regulations create an allowance for business owners to write off many depreciable business assets in the year the asset was purchased and placed into service for business needs. The tax experts from Optima Tax Relief review these new regulations and break down what this might mean for business owners.

These regulations were first proposed as part of 2018’s Tax Cuts and Jobs Act (TCJA), the most significant body of change American tax law has seen over the past 3 decades, and will become finalized once the submitted documents are published by the Federal Register.

Several provisions were implemented in the newly proposed regulations that had not been previously addressed, and all businesses should understand what these changes may mean to their tax deduction allowable write-offs. In order to take the depreciation deduction, the qualifying asset must have been purchased and put into service by the business – for business purposes – by September 27, 2017. However, these regulations also include proposed rules relative to the depreciation deduction and used property, as well as identify specific assets not eligible for the first-year depreciation deduction.

Business assets that may qualify for the first year 100% depreciation deduction include machinery, equipment, computers, appliances and even furniture – typically those business assets with a recovery period of 20 years or less. According to the IRS filing documents, these proposed regulations affect taxpayers who deduct depreciation for qualified property acquired and placed in service after September 27, 2017.


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