prior depreciation This is a topic that many people are looking for. s-star.org is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, s-star.org would like to introduce to you First Year Bonus Depreciation Tax Cuts and Jobs Act 2017 Income Tax Course CPA Exam Regulation. Following along are instructions in the video below:
“And welcome to the session. This is professor farhad and this session. We re going going to be looking at the appreciation and specifically we re going to be discussing first year. Depreciation known as the bonus depreciation well i like to call this.
The prom depreciation and you will see why this topic is covered in income tax course the cpa exam regulation d roll enrolled agent exam and as always i would like to remind my students that connect with me on a personal as well as a professional level. If you have a linkedin account if not you should have a linkedin account please connect with me on linkedin. I like to get to know my viewers on a professional level on a personal level as well as professionally you can like my facebook page and connect with me on a personal level. If you are haven t subscribed yet to my youtube channel.
Please do so and if you like the lectures please like them share them and let other students know about them put them in your playlist. I have a twitter account and website. Where he can reach me. And you can also browse my lectures using by chapter and by course about additional first year.
Depreciation now additional first year. Depreciation has been allowed for several years again just like section 179. This is an election. But here s the caveat or here s the here s the good news type of deal for businesses.
In a significant expansion of this provision. The tax cats and jobs act of president trump of 2017 allows tax payer to deduct 100 percent in the year qualified property placed in service. Guess what you remember section 179. We said well section 179 is pretty generous you can deduct up to 1 million.
Assuming you need the annual limitation and the business income limitation. Guess. What additional first year depreciation..
You can deduct 100 of the qualla of the qualified property basically deduct everything what does that mean it means you no longer have anything to the dock in the future. Ok. Now. Here s the other thing that that was expanded on this and by this tax law.
The qualified property includes most appreciable asset other than building other than real property with a recovery period of 20 years or less. So anything ld and the and the and on the makers schedule that s 20 years or less is qualify for this and the prior law locate the prior. My only restricted to new property have to buy new property. It doesn t have to be new property for property placed in service after september 27.
2017 bonus depreciation applies to both new and used remember we are talking about personal not real property. Okay not real property in a building. Okay not building so notice you can not only deduct new asset. Even if the property is used you can still deduct.
It okay so additional first year depreciation. It s staking. It s computed after any immediate expense deduction is claimed so first you claim your one section. 179.
Then you could claim you can claim the bonus depreciation after the additional first year. Depreciation is determined by regular makers cost recovery deduction is computed by by multiplying. The remaining cost recovery basis by the appropriate makers now at this point you may not have any basis. A few data a few if you wanted to deduct everything.
Then there s no makers now you might be saying hold on a second. Why don t i deduct everything well guess what if you deduct everything if use if you happen to be seen what all those personal property. I m gonna deduct 100 of them and get rid of them get rid of them in a sense depreciate the whole thing and takes the deduction that s good for now..
But what are you gonna do in future years in future years you might have more income and as a result your tax rate might be higher as a result you may be you may pay more taxes. So you have to strategically think how much should i take now and how much should i defer to the future because in the future. You might be making more profit. And you might be in a higher tax bracket.
So you have to think about how much should i take now how much should i take in the future. Well. What the president is really doing is trying to give you as much deduction as possible now. So you can you can enjoy this or you can enjoy the benefit of it.
But you have to be very careful now also remember what i want you to remember is there s also not a limit on your access business forces. If you remember we talked about access business losses okay. So you remember if you take a lot of deduction you may not be able to do that because of the excess business loss so you just have to know planned properly. But the rule is if you choose to you can take all of your personal property deducted this year.
Okay so the taxpayer may allah not to take first year first year depreciation and the reason is because you may not have deduction for future years. So you have to be very. Careful. Let s take a look at an example real quick just to kind of illustrate this which is it s kind of it s it s a simple concept.
But in in in practice. It makes a difference to your bottom line. So you have to be very careful of when to take when not to take and plan. Properly now again you can you can no one can see the future.
So you have to be very careful. So kelly acquires equipment on february 1st at the cost of 1 million. Three hundred and forty five first kelly elects to expense section..
179 that s your first option well if you elect to expense 179. So. What s left of the basis is 345 kelly also chooses to take bonus depreciation well. Guess what if you want to you can take the whole thing.
You can take deduct additional 345. Using bonus depreciation right as a result her cost recovery deduction for the year is 1 million. Three hundred and forty thousand 1 million for the section 179 345 for the bonus. That s the good news for this year.
That s great ok. What s gonna happen in future years when she has more income well. She has no deduction anymore. Because she took the deduction in 2018.
So simply put don t use all your bullets. Some people don t use all your bullets. So what s the best way. The best way is to take enough deductions this year to make your taxable income equal to zero anyway section 179 cannot you cannot use it if your if you have losses.
What you do is you would use it track you would use it strategically to bring your taxable income to zero. How do you bring your taxable income plus zero make expenses equal to revenues you have no taxable income as soon you only have a business. You are dealing with a business. So this is what you do so in other words.
Don t use all your bullets in that year. Keep some for the future. Even if you have to keep some income this year..
Maybe it will be more beneficial for you because in future years you might be in higher taxable bracket. Therefore you need the deduction you ll be more in of the deductions. So hopefully. This is this gave you an idea of what bonus appreciation is and this is why the president is much much more generous basically.
What the president is saying. I want to be friendly to taxpayers to not let me rephrase. I want to be friendly pro business. This is what what do you mean by pro business when we say the president is pro business.
But i m not advocating for that position. I m just telling you this is how it s this is how it s many fasts in itself. But remember it s a pro business now but in the future if companies don t buy so every if everybody bought assets this year and 2017 2018 because they can take the reduction in future years. They re not gonna be buying the assets.
So in future years as a result of who knows we might have a recession. Okay so so just it s it s there s pros and cons to everything and hopefully you agree with me that there s pros and cons with everything that you agree with me on anything else that set will stop if you re studying for your cpa exam. Study. Hard.
If you re studying for your courses study hard. If you happen to visit my website for additional lecture please consider market cap of netflix of ten point six billion same thing with ford ford increases from 1050 to fifteen. So we take the fifteen dollar new price ” ..
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