IRS, Treasury issue guidance on making, revoking bonus depreciation elections

Written on Aug 01, 2019

The IRS on July 31 issued a Revenue Procedure allowing a taxpayer to make a late election, or to revoke an election, under section 168(k) for certain property acquired by the taxpayer after Sept. 27, 2017, and placed in service by the taxpayer during its taxable year that includes Sept. 28, 2017.

The Tax Cuts and Jobs Act made several changes to bonus depreciation. For example, the additional first year depreciation deduction % was increased from 50 to 100%. The property eligible for the additional first year depreciation deduction was expanded to include certain used depreciable property and certain film, television, or live theatrical productions; the placed-in-service date was extended to before Jan. 1, 2027. Finally, the date on which a specified plant is planted or grafted by the taxpayer was extended to before Jan. 1, 2027.

There are three additional first-year depreciation deduction elections. A taxpayer can elect not to deduct the additional first year depreciation for all qualified property that is in the same class of property and placed in service by the taxpayer in the same tax year. Secondly, a taxpayer can elect to deduct 50%, instead of 100%, additional first year depreciation for all qualified property acquired after Sept. 27, 2017 and placed in service by the taxpayer during its taxable year that includes Sept. 28, 2017.

Finally, a taxpayer can elect to deduct additional first year depreciation for any specified plant that is planted after Sept. 27, 2017 and before Jan. 1, 2027 or grafted after and before those dates to a plant that has already been planted. If the taxpayer makes this election, the additional first year depreciation deduction is allowable for the specified plant in the taxable year in which that plant is planted or grafted.

The Revenue Procedure applies to these elections for the taxable year that includes Sept. 28, 2017. If a taxpayer did not make these elections timely for that taxable year, the Revenue Procedure allows the taxpayer to make late elections by filing an amended return or a Form 3115 for a limited period of time. If a taxpayer did make these elections timely for that taxable year, the Revenue Procedure also allows the taxpayer to revoke the elections by filing an amended return or a Form 3115 for a limited period of time.

Updates on the implementation of the TCJA can be found on the Tax Reform page of IRS.gov.

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