Taxpayers with QIP placed in service in the 2019 tax year that have not yet filed the 2019 return can simply recompute depreciation for their QIP using a 15-year recovery period and claim bonus depreciation for this property on their 2019 returns. Determine whether accelerated QIP depreciation can be taken into account on 2019 tax returns. Taxpayers should work with their tax advisers to perform a cost segregation study to identify and properly segregate the QIP and to help access the added liquidity the additional depreciation deduction can provide. For these taxpayers, the opportunity to claim additional depreciation deductions for QIP means thinking about how to identify QIP and recompute the depreciation deduction for QIP placed in service during 20. Getting the most from the QIP fix Identify eligible property.Īs a result of the QIP error, many taxpayers stopped separately tracking QIP and instead included their QIP within other building or building improvement property on their tax depreciation registers. Accordingly, taxpayers now can claim additional depreciation for QIP placed in service in 20. The CARES Act corrects the error in the TCJA and allows the 15-year recovery period and bonus depreciation eligibility retroactively for property placed into service after Dec. As a result, QIP was subject to a 39-year recovery period and was not eligible for bonus depreciation. Due to a drafting error, however, the statute failed to include QIP as eligible property for purposes of the recovery period and the bonus depreciation rules. In the TCJA, Congress intended to allow a 15-year recovery period (20 years for alternative depreciation system) and 100% bonus depreciation eligibility for QIP. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) includes a technical correction of an error in the Tax Cuts and Jobs Act of 2017 (TCJA) related to the depreciation of qualified improvement property (QIP). Find liquidity through the look-back depreciation opportunity
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