The Tax Cuts and Jobs Act (the Act) includes a variety of new depreciation provisions intended to simplify deductions and provide added benefits. However, traps for the unwary exist. As many of the changes come to light, so do the errors of these technical provisions. For example, lawmakers failed to insert the 15-year recovery period for qualified improvement property when they attempted to combine qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property, into one qualified improvement property (QIP) section of the Act.
What does this mean?
Although it appears that Congress intended to provide a 15-year recovery period for QIP, at this time, QIP placed in service on or after January 1, 2018, is now recovered over 39 years. The new law also allows 100% bonus expensing on property with recovery periods of 20 years or less. As a result, restaurants and retailers will now miss out on this tax write-off, as they are ineligible for bonus depreciation.
It is to be expected that more errors like this will emerge as the year continues. We expect Congress to fix this error with a technical correction, but we do not know when that might happen. Warren Averett has been actively following these changes and will continue to examine the new law. If you have questions about how the new law will affect you or your company, please contact your Warren Averett Advisor.