UPDATED Thursday, Dec. 17, 2015 at 4:15 p.m. CST
On Thursday afternoon, the U.S. House of Representatives voted to approve legislation that includes extensions of Section 179 and Bonus Depreciation. The Protecting Americans from Tax Hikes (PATH) Act of 2015 passed with a vote of 318-109. The Senate is likely to vote on the bill by the end of the week. The White House has indicated support for the bill as well.
The provision permanently extends the small business expensing limitation and phase-out amounts in effect from 2010 to 2014 ($500,000 and $2 million, respectively). These amounts currently are $25,000 and $200,000, respectively. The provision modifies the expensing limitation by indexing both the $500,000 and $2 million limits for inflation beginning in 2016.
A provision in the bill will allow dealers to depreciate remodeling and other improvements to their stores over 15 years rather than the previous standard of 39 years
In addition, the bill provides a 5-year extension of the bonus depreciation for property acquired and put in service during 2015-19. The bonus depreciation percentage is 50% for 2015, 2016 and 2017. In 2018, it will be phased down to 40% and down to 30% in 2019.
“The special rules that allow expensing for computer software and qualified real property, including qualified leasehold improvement property and qualified retail improvement property, also are permanently extended,” according to the summary from Ways and Means Committee chairman, Kevin Brady. “The provision modifies the expensing limitation by indexing both the $500,000 and $2 million limits for inflation beginning in 2016 and by treating air conditioning and heating units placed in service in tax years beginning after 2015 as eligible for expensing. The provision further modifies the expensing limitation with respect to qualified real property by eliminating the $250,000 cap beginning in 2016.”
Bonus depreciation is typically paired with higher Section 179 expensing levels.
We’ll provide additional updates on the extension of Section 179 and Bonus Depreciation as we learn more.
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Originally published Wednesday, Dec. 16 at 12:14 p.m.