The end of the year brought a whirl-wind of change. And for corporate tax and accounting professionals it may have created more changes than were bargained for. There are some key changes in the new tax law that corporate professionals need to know when it comes to their fixed asset management.
While this is not an all-encompassing list, let’s hit on some of the more prominent changes:
100% expensing of certain assets.
This provision in the new Tax Cuts and Jobs Act law, was perhaps one of the more prominent. Section 168(k) of the new law specifies the assets that qualify, or don’t qualify. What is very interesting to see in this notable change is that depreciation benefits are retroactive to September 27th, 2017.
For tax professionals, this may involve some recalculations of assets depending on when they were placed into service. For instance, if an asset was acquired prior to September 28th and placed into service after September 27th, it would qualify for 50% expensing. In comparison, assets acquired and placed into service after September 27th would qualify for 100% expensing.
Depreciation of “passenger vehicles” changed dramatically.
If, as defined by the law, a passenger vehicle is purchased for business use, the purchaser may deduct up to $10,000 in the 1st year; as opposed to the previous limited depreciable amount of $3,160. Depreciable amounts of $5,760 per year would be allowable in following years, until the vehicle is fully depreciated. This is a change from the yearly depreciable amount of $1,875. A significant change that will take effect after 12/31/2017.
Allowable Section 179 asset expensing was increased significantly.
Businesses prior to the tax law change were allowed to expense a business asset to the tune of $510,000 in 2017, with the maximum deduction reduced dollar for dollar, as additional assets placed into service exceed $2,030,000. With the new law, businesses will now will be able to expense up to $1 million in 2018, with the new phase out amount set at $2.5 million.
What do all these changes mean for Corporate Tax Managers, Directors, and their teams? It means that in many cases manual asset recordings made in 2017, may have to be updated today, given the retroactive aspects of the law. This is bitter sweet, in that these updates must be calculated on top of the already hectic schedule, as other deadlines draw near.
Solutions exist to address these new challenges.
Susan Sabatini, Wolters Kluwer’s CCH® Fixed Assets Manager-Product Owner explains the challenge awaiting many “With such late action by Congress, tax professionals will need to spend time re-evaluating their 2017 depreciation worksheets. This is to insure that the correct bonus percentage has been applied to assets placed in service during the final quarter of 2017. If you are burdened by manual calculations for depreciation, this change has extended re-work for you. However, if you are a CCH® Fixed Assets Manager user, our software will automatically calculate this for you. You will be able to continue with other tasks to file that return on time.”
In summary, it’s scenarios like this that make embracing fixed asset management technology a priority.
With the current technology available today, more professionals are choosing to streamline and automate their fixed assets, to not only make their jobs easier, but to avoid the mistakes that manual work can create. Furthermore, having the software keep up with the latest compliance and manual work automatically, lets staff get back to more important work.
For more information about how to streamline your Fixed Assets Management with Wolters Kluwer’s popular CCH® Fixed Assets Manager solution, download our current white paper, Simplify Fixed Assets Management to Increase Productivity by clicking here.
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Author: Jennifer Cunningham
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