Improvement Property Update


Article Posted on 05/15/2019


As we have discussed in previous newsletters there was a drafting mistake in the Tax Reform Act that was passed in December 2017.  Lawmakers intended qualified improvement property to be 15-year property and eligible for 100 percent bonus depreciation. Not so.

Qualified improvement property is any improvement to the interior portion of a building that is nonresidential real property (think office buildings and shopping centers) if you place the improvement in service after the date you place the building in service.

Due to a drafting error in the Tax Cuts and Jobs Act (TCJA), qualified improvement property is currently 39-year property and ineligible for bonus depreciation.

There was a way to get around some of this problem by determining which of the improvement property qualified for Section 179 property and use the expensing election. But as you probably know, Section 179 is not available to everyone and has its limitations, which can affect your ability to claim it.

Congress has several bills that contain the fix. For example, the Tax Technical and Clerical Corrections Act, introduced in the House of Representatives, would fix the qualified improvement property issue retroactively, along with many other TCJA issues.

If Congress retroactively fixes the qualified improvement property issue after you file your 2018 tax return, you’ll have to amend your tax return in order to get the benefits of qualified improvement property being 15-year property.

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