The “Tax Cuts and Jobs Act” will provide many property owners additional tax savings via cost segregation and utilization of its provisions.
A prominent feature is a return to 100% bonus depreciation, for new construction and property acquired and placed in service after September 27, 2017 and before January 1, 2023. The game changer is; that for the first time the benefit of bonus depreciation will include used property! The result is an opportunity to immediately depreciate a significant percentage of their building basis.
The law also consolidates Leasehold (QLI), Retail, Restaurant and Improvement (QIP) property into a single Qualified Improvement Property (QIP) designation. This should simplify the process of accounting for property improvements by applying identical rules to the above mentioned property types. A technical correction to the law is anticipated that will apply a 15 year MACRS life to all non-structural interior improvements for these properties and thereby 100% bonus. Cost segregation can provide the required identification of structural vs non-structural building improvements.
The new regulations include a dramatic change for clients that construct or acquire restaurants. In past years they were afforded a 15 year life for all improvements but now return to 39 year life. As a result restaurant property owners should revisit the benefit available utilizing cost segregation.
Multi-family residential property has historically recognized substantial benefit with cost segregation. The increased bonus depreciation should compel all owners who acquire or newly construct property to consider this strategy.
According to a recent article in the AICPA’s Journal of Accountancy,
“Selecting a firm that uses qualified professionals with years of significant, relevant experience can be an important differentiator in the quality of a cost segregation study.”
Journal of Accountancy
© From the AICPA