Permanent increase in expensing limits under §179 creates big benefits for small businesses.
Recent passage of the Protecting Americans Against Tax Hikes (PATH) Act of 2015 makes permanent or extends several provisions. This is particularly noteworthy for small businesses that often rely on the cash flow these incentives create to invest in additional staff or equipment.
A permanent extension of the §179 Expensing Rules extends the small business expensing limitation and phase-out amounts in effect from 2010 through 2014 to $500,000 and $2 million, respectively. This is a significant increase from the current amounts of $25,000 and $200,000 and another win for small businesses. The provision also modifies the expensing limitation by indexing both the $500,000 and $2 million limits for inflation beginning in 2016.
Also permanently extended are the special rules that allow expensing for qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property. The provision modifies the expensing limitation with respect to qualified real property by eliminating the $250,000 cap beginning in 2016.
In addition, heating and air condition units placed in service in tax years beginning after 2015 can now be expensed.
15-year straight-line cost recovery for qualified leasehold improvements, restaurant buildings and improvements, and retail improvements are now permanent benefits.
Retailers, restaurant operators and businesses with increasing leasehold needs can now count on the 15-year recovery period, provided they meet the established criteria for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements.
Bonus depreciation is extended with sunset.
Bonus depreciation has been a lucrative incentive since 2001. The PATH Act extends 50 percent bonus depreciation for 2015, 2016 and 2017. It reduces to 40 percent for 2018 and 30 percent in 2019.
Interestingly, the provision modifies bonus depreciation to permit certain trees, vines and plants bearing fruit or nuts to be eligible for bonus depreciation when planted or grafted rather than when placed in service.
Also extended is the §179D green building deduction for the construction of commercial properties that meet certain ASHRAE standards for energy-efficient installation of lighting, HVAC and building envelope. This deduction can be taken by building owners, or in the case of public buildings such as schools, hospitals or other government-owned properties, it can be taken by the primary designer.
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