Tax Reform Improves Expensing And Depreciation Rules

The Tax Cut and Jobs Act made several key changes to the expensing and depreciation rules, which will be a boon for Senior Living businesses that tend to be real estate heavy.

1. Bonus Depreciation

The Act provides for 100% bonus depreciation in the year that tangible personal property (excluding buildings and building improvements, although other beneficial treatment is now provided for these assets as discussed below in 2 and 3) and computer software is placed in service. This allows for full cost recovery in the year of acquisition, in contrast to the prior rule of 50% recovery. This rule applies for property acquired and placed in service after September 27, 2017. Another key change is that a taxpayer can now qualify for bonus depreciation when it acquires used property. The bonus depreciation starts phasing out in 2023.