December 16, 2019
Manager Chris Cicalese, CPA, MSTFP contributed advice on end-of-year construction equipment purchases in the Equipment World Magazine article “It’s not too late to get 100% depreciation on Dec. construction equipment purchases—but should you?.”
The article was a follow up to 2018 publications featuring Rich Middleton, CPA and Mike Engleman, CPA.
The main change in the benefit for this year is an inflationary increase, which was another new provision in the Tax Cuts and Job Acts of 2017.
That means the maximum Section 179 expense that can be deducted for equipment has risen $20,000 to $1,020,000 for 2019, according to CPA Chris Cicalese, manager at Alloy Silverstein in Cherry Hill, New Jersey.
The cap on the amount of equipment purchased to take the full benefit has also risen, by $50,000 to $2.55 million, Cicalese says. Once the $2.55 million cap is reached, the benefit gradually phases out until reaching $3.5 million.
Bonus depreciation for 2019 is again 100 percent and again has no cap, same as in 2018.
Cicalese also notes that 100 percent depreciation in the first year prevents depreciation of that equipment in future years.
The eventual phase out of 100 percent bonus depreciation in future years is something else to consider.
“It is more important to discuss how to use the depreciation provisions along with any other provisions, such as the Qualified Business Income Deduction, with your CPA to take advantage of what is available now and speculated to not be available in the future,” Cicalese says.
Contractors should also be aware of the Section 179 and bonus depreciation rules for the states they operate in. Not all states followed the federal tax changes.
Cicalese expects, though, that any late purchases will be based more on need rather than tax benefit.
“Although the tax law change can provide a more favorable result,” he says, “it is my experience that taxpayers don’t necessarily go out of their way to buy assets that weren’t essential in their day-to-day just because of the new 179 or bonus depreciation rules.”
Follow Chris on Twitter at @AthleteCPA. Follow Equipment World on Twitter at @Equipment_World for additional articles on construction, heavy equipment, and industry business news.
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