30 | RKL 2018 Year-End Tax Planning Guide RKL 2018 Year-End Tax Planning Guide | 31 FIXED ASSET PLANNING Tax reform allows owners to garner more immediate savings from larger business deductions and expenditures in two key areas: bonus depreciation and IRC Section 179 expensing. Using bonus depreciation or Section 179 requires strategic advance planning, so make sure to discuss all tax implications of asset purchases with your RKL advisor. Bonus Depreciation Doubled Previously, businesses could deduct only 50 percent of their capital expenditures through bonus depreciation for things like new equipment, vehicles and furniture. Starting September 27, 2017 through December 31, 2022, tax reform doubles bonus depreciation to 100 percent for qualifying property and based on acquisition and in-service dates. In addition to the doubled rate (which reduces by 20 percent annually after 2022), tax reform also expanded the types of property eligible for bonus depreciation. For the first time, these benefits are extended to include used property, in addition to assets like films, television shows and theatrical productions. As a result of qualifying used property now being eligible for bonus depreciation, cost segregation has become even more of a beneficial tax strategy. Personal property and land improvements identified through cost segregation of a building purchased and placed into service after September 27, 2017, are now eligible for 100 percent bonus depreciation (rate reduces by 20 percent annually after 2022). Previously, these assets would not have qualified since they were considered used property. Bottom line: The retroactive application back to September 27, 2017, plus the widened eligibility, allows facility owners to get twice the immediate deduction from writing off qualified purchases. Section 179 Limits Increased Another popular asset-related tax strategy is the IRC Section 179 Small Business Asset Expensing Election. This election allows owners to immediately expense the full purchase price of eligible property such as software, equipment, furniture and fixtures, rather than capitalizing them as long as they have taxable income in the year of acquisition. Starting January 1, 2018, tax reform makes small business asset expensing an even more attractive option for business owners in two key ways. First, the Section 179 limit increased from $510,000 to $1 million. This limitation will be adjusted annually for inflation and applies only to property placed in service in tax years beginning after 2017. The phase-out threshold also increased from $2.03 million to $2.5 million. Businesses that exceed this phase-out will see their expensing amount reduced dollar-for-dollar. Second, the new tax law also broadens eligibility to the following items that were previously excluded: • Tangible personal property used in connection with lodging • Certain structural components in non-residential real property: roofs, HVAC, fire protection and alarm systems and security systems RKL 2018 Year-End Tax Planning Guide | 31