The Tax Cuts and Jobs Act of 2017 Makes Bonus Depreciation Even More Useful
Everyone knows about the Tax Cut and Jobs Act of 2017. The new tax law significantly reduced tax rates for many taxpayers. The new tax law also changed the depreciation rules in equally significant ways. On such way is the new availability of bonus depreciation both at a higher percentage and on a wider range of tangible assets. Under the new law, qualified property (defined as tangible personal property with a recovery period of 20 years or less) placed in service after September 27, 2017, will be eligible for 100% bonus depreciation through December 2022. The new law also eliminates the requirement that the original use of the qualified property begin with the taxpayer, as long as the taxpayer had not previously used the acquired property and the property was not acquired from a related party. The inclusion of used property is a significant, and favorable, change for buyers acquiring a business. This means bonus depreciation can be applied in Year 1 following the acquisition to offset tax liability. This will often free much-needed cash flow to service debt and fund other cash transition costs that often make the first year after an acquisition the most difficult year.
Andrew J. Miller, JD, CM&AA® advises buyers and sellers of main street and middle market companies in private mergers and acquisitions. He is recognized as a Certified Mergers & Acquisitions Advisor® by the Alliance of Mergers & Acquisitions Advisors, an organization focused on the private middle market. He can be reached at (717) 845-1524, or firstname.lastname@example.org.