Changes to depreciation and Section 179 expensing

October 2018

Howard Abrams

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The way you depreciate your truck is another major change that came from tax reform. Before the Tax Cuts and Jobs Act, tractors would be depreciated over a three-year period, while trailers would depreciate over five years. However, beginning in 2018, 100 percent of the purchase will be automatically depreciated during the year the equipment was put into service. You will have the option to opt out and continue with a normal depreciation schedule if you’d prefer.

After 2022, the amount of bonus depreciation will begin to be phased out with 80 percent in 2023, 60 percent in 2024, 40 percent in 2025, and 20 percent in 2026. Plus, in the past, bonus depreciation was only allowed on new equipment. Now, it can be applied to both new and used equipment.

Those of you who have used Section 179 understand that this allows you to immediately depreciate personal property, which could include tractors or trailers. The Tax Cuts and Jobs Act pushed the maximum amount from $500,000 to $1 million. It also increased the phase-out amount to $2.5 million. LL

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