Depreciation: What’s New For 2020
Section 179 deduction dollar limits. For tax years beginning in 2020, the maximum section 179 expense deduction is $1,040,000 ($1,075,000 for qualified enterprise zone property). This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $2,590,000.Also, the maximum section 179 expense deduction for sport utility vehicles placed in service in tax years beginning in 2020 is $25,900.
The increased section 179 deduction will not apply to qualified empowerment zone property placed in service after December 31, 2020.
Expiration of the special depreciation allowance for qualified second generation biofuel plant property. The special depreciation allowance will not apply to qualified second generation biofuel plant property placed in service after December 31, 2020.
For this year’s 2018 Depreciation Limits, business use vehicles offer opportunities and challenges. Claiming depreciation as a business expense for personally available vehicles is a clear advantage. As is common, a “but” is included due to special rules known as “Listed Property” attributes. These rules recognize there are both personal and business attributes associated with the same asset; the vehicle has a value to the individual and their business using the vehicle which has necessitated specific 2018 Car and Truck Depreciation Limits.
The conceptual challenge is that there are differences between a business van say, for a “Construction Person”, and the “Executive” with a new Mercedes, known as Listed Property. Read More
The Tax Cuts and Jobs Act (H.R. 1, “TCJA”) has is now law. The law contains many provisions affecting both individuals and small businesses. The main provisions affecting businesses are summarized below. Except where otherwise noted, these changes apply to after January 1, 2018. Thus, they do not apply to your 2017 taxes and your upcoming tax return.
What’s The New Corporate Tax Rate?
The cornerstone of the TCJA is a new lower rate for regular C corporations. C corporations are separate taxpaying entities with their own tax rates. Under the TCJA all C corporations are subject to single flat tax rate of 21 percent. The previous tax rates ranged from 15 percent to 35 percent. Read More
When you use your car for business there are two ways to calculate your deduction: using the standard mileage rate or the actual expense method. The standard mileage rate method has remained the same and your miles are worth more in 2018. But, let’s go over how the actual expense method has changed.
Standard Mileage Rate Vs. Actual Expense Method
Most people use the standard mileage rate because it’s easier and simpler. All you do is keep track of your business mileage and deduct a set amount for each business mile. Read More
If you’re like most taxpayers, you find yourself with an ominous stack of “homework” around TAX TIME! Pulling together the records for your tax appointment is never easy, but the effort usually pays off in the extra tax you save! When you arrive at your appointment fully prepared, you’ll have more time to:
- Consider every possible legal deduction;
- Evaluate which income reporting and deductions are best suited to your situation;
- Explore current law changes that affect your tax status;
- Talk about tax-planning alternatives that could reduce your future tax liability.
In any successful family business there will likely come a time when descendants will want to take over the business from the older generation of owners. Usually, this will require that entities will need to be split into different business entities to accommodate both differences between the descendants (perhaps the descendants can’t cooperate with each other) or managing risk, so that high risk business can be separated from lower risk businesses and investments (construction business needs to be separated from investment assets such as stocks, bonds, annuity assets).
Justin Fundalinski of Jim Saulnier & Associates, who I met while volunteering time for the betterment of the Financial Planning Association, asked me a procedural question about a fascinating situation he encountered regarding depreciation and disposition of residential rental real estate, causing pause. Tax questions that cause me to pause are the spice of life.
What are Capital Assets on a Balance Sheet? The Capital Assets category appears under Long Term Assets on a Balance Sheet. It is also referred to as Property, Plant and Equipment. This section is comprised of various property such as buildings, machinery, computers, vehicles and other equipment.
Taxpayers can elect to take a simplified deduction for the business use of the taxpayer’s home. The deduction is $5 per square foot, with a maximum square footage of 300. Thus, the maximum deduction is $1,500 per year. Here are the details of this simplified method:
Annual Election – A taxpayer may elect to take the safe-harbor method or the regular method on an annual basis. Thus, a taxpayer may freely switch between the methods each year. The election is made by choosing the method on a timely filed original return and is irrevocable for that year.
Depreciation – When the taxpayer elects the safe-harbor method, no depreciation deduction for the home is allowed, and the depreciation for the year is deemed to be zero. Read More
As the economy shows signs of improvement, with the stock market rebounding and unemployment falling steadily, it is only reasonable to believe, all thing being equal, that the housing market will also rebound, and will once again become a very viable investment vehicle. There are a number of distinct tax advantages to be derived from investing in real estate, and this article will look at some of these advantages. For both middle and high-income individuals alike, the tax advantages of investing in real estate can be substantial. Some of the advantages are as follows:
The IRS allows investors to depreciate (deduct from rental income) the cost of a residential rental building over a period of 27.5 years, and 39 years for nonresidential Read More
Calculating the Depreciation Using GDS –
Once you have determined an asset’s class life, recovery period, and convention it is time to refer to the depreciation tables at the back of your text. If the asset you are calculating depreciation for is not a newly placed asset, you must know the date the asset was placed into service so that you use the appropriate recovery percentage. You will find the depreciation tables in IRS Pub 946 starting on page 70, all table references are from that publication. (http://www.irs.gov/pub/irs-pdf/p946.pdf) Table A-1 will be used for all GDS HY convention property.
For Example: Using table A-1, if a piece of 5 year property was placed into service in 2012 Read More
Once you have determined your property is depreciable you must determine the class life assigned by the IRS. The Table of Asset Class Lives and Recovery Periods (CLDR) is used for this purpose. It can be located on the IRS website.
There are two methods of determining class life for a piece of non-real property, the General Depreciation System (GDS) or the Alternative Depreciation System (ADS). GDS uses a method that allows the expense for the property to be recovered more quickly in the earlier years of it”s class life. And ADS is a straight line method which basically takes the number of years of the class life and depreciates an equal amount each year over the entire life of the property. Read More