Key Tax Law Changes in v2016.1

• Bonus depreciation for qualified property is extended 5 years through 2019 (through 2020 for certain property with a longer production period).
• The bonus percentage is 50% for property placed in service 2015, 2016 and 2017. The percentage drops to 40% in 2018 and 30% in 2019.
• The act continues to allow taxpayers to elect to accelerate the use of AMT credits in lieu of bonus deprecation.
• Qualified improvement property is eligible for bonus starting in 2016 (from 2010 through 2015, only qualified leasehold improvement property is eligible).
• Certain trees, vines and plants bearing fruit and nuts are eligible for bonus when planted or grafted, instead of when placed in service, beginning in 2016.
• The first-year depreciation cap “bump-up” of $8,000 for ‘luxury’ autos and certain trucks, which do not elect out of bonus, is extended through 2017. The bump up is reduced to $6,400 in 2018 and $4,800 in 2019.

• The 179 expensing deduction amount and investment limit ($500,000 and $2,000,000, respectively) are reinstated and made permanent as of 2015. These limits are indexed for inflation beginning in 2016.
• The special rules that allow expensing for computer software and qualified real property are also permanently extended.
• The $250,000 expensing limitation cap on qualified real property is removed for tax years beginning after 2015. Thus the limit on real property will be the same as personal property.
• Provision allowing taxpayers to revoke a 179 election without obtaining consent of the Secretary.
• Air conditioning and heating units placed in service in tax years beginning after 2015 are eligible for expensing.

For qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvement property is permanently extended.

• The act extends accelerated depreciation for qualified Indian Reservation property 2 years, through 2016.
• The act allows taxpayers to elect out of the accelerated rules for property placed in service in 2016.

Below is a brief summary of how to switch your existing 2015 assets to take advantage of the bonus depreciation of 50%. For more information on the 168 Allowance such as to see which assets qualify, potential messages and to find detailed help, search “168 allowance” in the Online Help and User’s Guide files under Help in the menu bar.

Note: The 50% Allowance must be taken, unless you specifically elect out of claiming the 50% additional first-year depreciation.

Steps to follow:

1. Create a group of qualifying assets of your 2015 acquisitions using Group Manager.
2. Select Depreciate/168 Allowance Switch from the menu to open the 168 Allowance Switch dialog box.
3. Select the group created in Step 1.
4. Select the books to update (e.g. Tax, AMT, State, etc.).
5. Choose Fiscal Year End (e.g. 12/2015).
6. Select Change qualifying assets to: 50% allowance.
7. Select OK. All qualified assets will now have the 50% Allowance applied to them.

While there is no button to apply Section 179 to a group of assets, you can quickly review the Tax Expense report to see which assets to allocate the Section 179 expensing deduction.

Steps to follow:

1. Create a group of all your assets placed in service during your fiscal year beginning in 2015.
2. Calculate depreciation for the group created in step #1 through your fiscal year end.
3. Select Reports/Standard Reports/Tax Expense from the menu bar.
4. In the Group section, choose the asset group created in step #1 above.
5. In the Date section, select the same date that you calculated deprecation for in step #2.
6. Run the report for to see any Section 179 expense already entered for the year and to help you decide which other assets to apply Section 179.

Be sure to recalculate depreciation and run any reports again for books that have been updated (e.g. Tax book) to ensure that you have the latest information and the results are as you expected.