Tax Reform Changes Regarding Cost segregation
At Engineered Tax Services, not only are we on top of the cost segregation industry from a technical engineering and accounting standpoint, but also from a legislative perspective as well.
Recent tax reform has brought on significant changes impacting our real estate clients and the benefits they receive from performing a cost segregation study.
Below you will find specific areas of cost segregation that have been modified or changed. We have organized this information by property type.
This post regarding recent Cost Segregation changes is offered from an educational standpoint.
Consultations at Engineered Tax Services are always free. Please contact one of our professionals or coordinate with us through your CPA by calling (800) 236-6519 to learn more.
Engineered Tax Services partners with real estate professionals and CPA firms nationwide.
Cost Segregation and New Depreciation Rules
Special Note: Bonus Depreciation is only eligible on qualified property with a Class Life of 20 years or less.
Purchases of Used Property
Properties acquired and placed in service after 9/27/2017 is allowed 100% bonus depreciation on used property with a class life of 20 years or less.
This runs through 12/31/2022 and scales down annually.
1/1/2023 - 12/31/2023 = 80%
1/1/2024 - 12/31/2024 = 60%
1/1/2025 - 12/31/2025 = 40%
1/1/2026 - 12/31/2026 = 20%
Note: If purchase contract was entered into prior to 9/28/2017, then 0% bonus depreciation applies and use closing date for Placed in Service date.
New Construction, Improvements and Purchases of New Property
Properties acquired and placed in service after 9/27/2017 - 12/31/2017 is allowed 100% bonus on used property.
This runs through 12/31/2022 and scales down from there.
1/1/2023 - 12/31/2023 = 80%
1/1/2024 - 12/31/2024 = 60%
1/1/2025 - 12/31/2025 = 40%
1/1/2026 - 12/31/2026 = 20%
Note: If New Construction, Improvement or Purchase of New Property contract was signed prior to 9/28/2017, then generally 50% bonus applies and use the Certificate of Occupancy or closing statement for Placed in Service date.
Old bonus rules prior to 1/1/2012 are still applicable.
Qualified Leasehold and Retail Improvements
Properties acquired and placed in service after 9/27/2017 - 12/31/2017 is allowed 100% bonus on new property.
Note: If Improvement contract was signed prior to 9/28/2017, then 50% bonus applies and use the Certificate of Occupancy for Placed in Service.
Note: Note: 15-year recovery period if placed in service by 12/31/2017.
Note: QIP placed in service on or after 1/1/2018 is 39 year and is NOT BONUS eligible.
Qualified Restaurant Property
Properties acquired and placed in service after 9/27/2017 - 12/31/2017 is allowed 100% bonus on new and used property recovered at 5/15 years but not the "Restaurant Property".
Note: If a purchase and contract was signed prior to 9/28/2017, then 0% bonus applies and still use the closing date for Placed in Service date. If signed and closed from 9/28/2017 - 12/31/2017, then 100% bonus applies on the 5 & 15 year but not the "Restaurant Property" which is recovered at 39 years.
Note: If new construction, the same rules apply as listed in note above, except prior to 9/28/2017, 5 & 15 year property are eligible for 50% bonus.
