Tax Tip: Be Sure to Review New Business Deduction Rules

The Tax Cuts and Jobs Act made changes to the rules around depreciation that will affect many businesses. The IRS reminds businesses to review depreciation deductions rules. These deductions can benefit eligible business taxpayers. Here are some of the changes to business depreciation under tax reform:

  • Taxpayers can immediately expense more. Businesses may choose to expense the cost of a property and deduct it in the year it is placed in service.
  • The maximum deduction increased from $500,000 to $1 million.
  • The phase-out limit increased from $2 million to $2.5 million.


Taxpayers may include improvements made to nonresidential property. The improvements must have been made after the date the property was first placed in service. These improvements include:

  • Changes to a building’s interior
  • Roofs
  • Heating and air conditioning systems
  • Fire protection systems
  • Alarm and security systems
  • Improvements that do not qualify:
  • Enlargement of the building
  • Service to elevators or escalators
  • Internal framework of the building

These changes apply to property placed in service in taxable years beginning after December 31, 2017.

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