Treasury and IRS propose 100% expensing for Capital Assets

The Treasury Department and the Internal Revenue Service proposed regulations Friday to increase and expand the first-year depreciation deduction for qualified property from 50 to 100 percent, carrying out a provision of the Tax Cuts and Jobs Act.

The tax code overhaul, which Congress passed last December, increased the first-year depreciation deduction from 50 to 100 percent for qualified property acquired and placed in service after Sept. 27, 2017. The increased benefit aims to expand opportunities for small and midsized businesses to expense equipment purchases and make capital investments in their companies. The proposed regulations are among a litany of rulemaking that the Treasury and the IRS are expected to roll out in the years ahead to implement various provisions of the far-reaching tax overhaul.

“The Tax Cuts and Jobs Act is making it easier for businesses of all sizes to grow and create jobs for hardworking Americans,” said Treasury Secretary Steven T. Mnuchin in a statement. “This expensing provision will be a key driver in creating greater business investment and growth.”

The new tax law also expands the meaning of qualified property to include certain used depreciable property and certain film, television or live theatrical productions, a move that’s expected to help boost the entertainment industry. The proposed change also extends the placed-in-service date by seven years from Jan. 1, 2021, to Jan. 1, 2027.

The deduction applies retroactively to qualified property that’s been acquired and placed in service after Sept. 27, 2017. The first-year allowance is 100 percent, and is then decreased by 20 percent annually for qualified property placed in service after December 31, 2022.