Several provisions of the Protecting Americans from Tax Hikes Act of 2015 (PATH) impact Code Section 179 and taxpayer’s depreciation options beginning in 2016. The highlights of those changes include the following:
- The elevated expensing limitation and the phase out limits have been made permanent and indexed for inflation. For 2016, the expensing limitation is $500,000 and the phase-out limit is $2,010,000.
- Computer software is now permanently eligible for expensing under Code Section 179.
- For tax years beginning after December 31, 2015, air conditioning and heating units are eligible for expensing under Code Section 179.
- For tax years beginning after December 31, 2014, the PATH Act allows an expensing election under Section 179 or a specification of property to be expensed to be revoked without IRS’s consent.
- Previous to the passage of the PATH Act, “qualified real property” was able to be expensed under Code Section 179 up to $250,000 and any portion of disallowed expensing was not able to be carried forward. For tax years beginning after December 31, 2015, taxpayers can now expense “qualified real property” up to $500,000 under Section 179 and also carryforward any disallowed expensing without limitation. Qualified real property refers to “qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property.”
Code Section 179 changes, combined with remaining bonus depreciation options for 2016, provide for some significant opportunities for year-end tax planning. In certain situations, real property that previously was not available to be expensed immediately under Code Section 179 but had to be depreciated over 39 years, is now available to be expensed immediately.
We encourage you to make an appointment with your tax professional to evaluation your tax situation for 2016 and look for tax saving opportunities before the year end.
By: Aric Salgat
Make your tax planning appointment today. Contact BHT&D CPA’s at (616) 642-9467 or request a complimentary accounting consultation.
Photograph by: Freeimages.com/Kevin Smith