Construction Today - Volume 16, Issue 2 - 12
Elizabeth Boone is
the tax law editor for
Bloomberg Tax. She can
be reached at eboone@
be the original user of the property so long
as the property is not acquired from a related
person or entity.
This additional expensing is set to phase
down 20 percent every year after 2022, and
ultimately is set to expire for property placed
in service after Jan. 1, 2027. The incremental
phase down is one year longer for property
with longer production periods.
Expanded Expensing of
Recognizing the need for smaller businesses
to immediately expense new machinery and
equipment, the act permits businesses to
elect to expense up to $1 million (increased
from $500,000), subject to phase out if the
costs exceed $2.5 million (increased from $2
million). The act also expands the definition of
qualified real property to include all qualified
improvement property and certain improvements - such as roofs; heating, ventilation,
and air-conditioning property; fire protection
and alarm systems; and security systems -
made to nonresidential real property.
CONSTRUCTION-TODAY.COM VOLUME 16, ISSUE 2
Further, the $25,000 cost limitation for SUVs also is indexed for
inflation for tax years beginning after 2018.
Historic Rehabilitation Tax Credit
The construction industry should benefit from an increased historic
rehabilitation tax credit. The act provides a 20 percent credit to be
claimed ratably over a five-year period beginning in the tax year
when the structure is placed in service for qualified rehabilitation
expenditures with respect to a historic structure. This provision replaces a one-time 10 percent credit. The act generally is effective for
amounts paid or incurred after Dec. 31, 2017, with a transition rule
for specifically qualified buildings.
Some provisions will likely limit deductions for construction
firms with limited capital or business losses.
Business Interest Expense Deduction
Large construction businesses with more than $25 million of annual
gross receipts will encounter rules that may modify the deductibility of interest expense, depending on how leveraged the business
is. The act limits the deductibility of interest expense to the sum of
business interest income and 30 percent of the business's adjusted
Business interest not allowed as a deduction in a tax year can be
carried forward indefinitely; the act provides that adjusted taxable
income is computed without regard to any deduction allowable for