Don’t Overlook Tax Benefits When Purchasing Construction Equipment

As construction company owners assess labor, material and equipment needs, it’s important to keep in mind that most equipment purchased for a jobsite will qualify for “bonus” depreciation. Increased by the 2017 Tax Cuts and Jobs Act (TCJA) and further clarified by IRS final regulations (T.D. 9874), a 100% first-year depreciation deduction is available for qualified property that’s placed into service by a trade or business after September 27, 2017 and before January 1, 2023. After 2022, the bonus depreciation deduction decreases in 20% increments until it’s fully phased out on December 31, 2026.

When contractors are deciding which equipment to buy, they need to remember that both new and used equipment qualifies for bonus depreciation, as defined by regulations released last September. Since the TCJA allows for bonus depreciation when the property is considered “original use” to the taxpayer, contractors can now generally utilize bonus depreciation for used equipment, something not available under prior tax law.

Bonus depreciation also applies to certain vehicles as well. Trucks, large SUVs and vans with gross vehicle weight ratings greater than 6,000 pounds are not subject to the annual depreciation limitations applicable to passenger automobiles. Therefore, heavy vehicles used either on the jobsite or on the road can also qualify for bonus depreciation.

If you have any questions about the applicability of bonus depreciation on your equipment purchases, don’t hesitate to contact a member of the Schneider Downs Construction Focus Group.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2020 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on

Tax, Tax Reform, TCJA BY Kirk Mitchell
American as Baseball Games and Apple Pie – the Business Meal Deduction
New Revenue Recognition Standard Disclosure Examples for Construction Companies
Tax Accounting for Construction
Don’t Overlook Tax Benefits When Purchasing Construction Equipment
Don’t Overlook Tax Benefits When Purchasing Construction Equipment
2020 Congressional Research Service Report on TCJA Impact on Families

Register to receive our weekly newsletter with our most recent columns and insights.

Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us

contact us

Map of Pittsburgh Office
Pittsburgh

One PPG Place, Suite 1700
Pittsburgh, PA 15222

contactsd@schneiderdowns.com
p:412.261.3644     f:412.261.4876

Map of Columbus Office
Columbus

65 East State Street, Suite 2000
Columbus, OH 43215

contactsd@schneiderdowns.com
p:614.621.4060     f:614.621.4062

Map of Washington Office
Washington, D.C.

1660 International Drive, Suite 600
McLean, VA 22102