In passing the Protecting Americans From Tax Hikes (PATH) Act of 2015, Congress brought forth several notable changes to the previously expired bonus depreciation provisions. Much was said about the retroactive extension of bonus depreciation through 2019, but an equally noteworthy (in my opinion) change received far less fanfare: the addition of “qualified improvement property” as eligible for bonus depreciation.
Previously, bonus depreciation was available only for improvements to interior property that was older than three years, was subject to a lease, and was not owner-occupied. But now these limitations have been lifted.
As defined in the PATH Act, Sec. 168(k)(3), qualified improvement property includes improvements to the interior of any nonresidential real property placed in service after the date the building was first placed in service. That’s it—nothing about its age or occupancy status. (It does not, however, include any enlargement of the building, improvements to or additions of elevators or escalators, or improvements to the building’s structural framework.)
Here’s how this change benefits…
Consider moving forward with improvements sooner rather than later.
If you have plans to make interior building improvements (remember, not expansions), I recommend getting started as soon as possible, as bonus depreciation will phase out by 2019.
For property placed in service in 2015, 2016, or 2017, bonus depreciation provides a depreciation deduction equal to 50 percent of the adjusted basis of qualifying property in the first year it’s placed in service. For property placed in service in 2018, the deduction is 40 percent; for 2019 (the final year), it’s 30 percent.
At a minimum, it’s worth putting in a call to your tax advisor to find out how you can benefit from these lesser-known PATH Act changes.