2023 . The TCJA also favorably broadened the provision to apply toward acquired properties , which was not previously allowed .
Making bonus deprecation even more valuable , the CARES Act included a technical correction that now gives qualified improvement property ( QIP ) a 15- year class life , which makes it eligible for the 100 % bonus depreciation . ( Prior to the CARES Act , the law required QIP placed in service after Dec . 31 , 2017 , to use a 39-year tax life , making it ineligible for bonus depreciation .) QIPs include improvements made to an interior portion of nonresidential property as long as that improvement is placed in service after the initial date the building was placed in service , with the exclusion of costs associated to elevators , escalators , changes to structural framework or building expansions . Additional “ qualified property ” for bonus depreciation includes depreciable property with a recovery period of 20 years or less , computer software , water utility property and more .
The CARES Act also provided taxpayers with a five-year carryback of net operating losses ( NOL ) generated in a taxable year beginning after Dec . 31 , 2017 , and before Jan . 1 , 2021 . Bonus depreciation on QIPs could generate NOLs , allowing taxpayers to request an immediate tax refund for prior years , bringing another opportunity to generate cash flow in 2021 .
Why You Should Act Now
Under TCJA , the bonus depreciation deduction percentage for qualified property will begin to phase out over four years ( and sunset completely after Dec . 31 , 2026 ), so taxpayers with real estate property should take advantage of this provision soon . Navigating this process can be complex , so be sure to work with a trusted tax advisor , like those at Doeren Mayhew , to ensure you are properly qualifying property for bonus depreciation to maximize your tax savings .
To learn more about cost segregation studies and whether you can benefit from this significant tax planning opportunity , contact Doeren Mayhew ’ s dedicated Tax Group today . ■
Issue 1 | 2021 VIEWpoint 11