IRS Finalizes Last Set of 100% Bonus Depreciation Rules

IRS headquarters in Washington. (Photo: Bloomberg)

The Treasury Department and Internal Revenue Service released Monday the last set of final regulations implementing the 100% additional first-year bonus depreciation deduction, which allows businesses to write off the cost of most depreciable business assets in the year they are placed in service.

The 100% additional first-year depreciation deduction was created by the 2017 tax overhaul and generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property — machinery, equipment, computers, appliances and furniture generally qualify, the IRS explained.

The deduction applies to qualifying property (including used property) acquired and placed in service after Sept. 27, 2017.

The final regulations provide clarifying guidance on the requirements that must be met for property to qualify for the deduction, including used property. Also provided are rules for consolidated groups and rules for components acquired or self-constructed after Sept. 27, 2017, for larger self-constructed property on which production began before Sept. 28, 2017.

For details on claiming the deduction, see the final regs and the instructions to Form 4562, Depreciation and Amortization (Including Information on Listed Property).

Treasury and IRS plan to issue procedural guidance for taxpayers to opt to apply the final regs in prior taxable years or to rely on the proposed regs issued in September 2019.

Final Regs on Estates, Non-Grantor Trusts

The IRS also issued final regs Monday providing guidance for decedents' estates and non-grantor trusts, which clarifies that certain deductions of such estates and non-grantor trusts are not miscellaneous itemized deductions.

The final regs clarify that the following deductions are allowable in figuring adjusted gross income and are not miscellaneous itemized deductions:

Deductions for costs paid or incurred in connection with the administration of the estate or trust which would not have been incurred if the property were not held in such estate or non-grantor trust.
The deduction concerning the personal exemption of an estate or non-grantor trust.
The distribution deductions for trusts distributing current income.
The distribution deductions for trusts accumulating income.