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Tax Changes Affect Fixed Assets

Updated: Nov 20, 2023

Fixed assets are long-term items that add value to your business. They are tangible items that you do not expect to convert into cash in less than one year. Long-term intangible items, like goodwill and intellectual property, can also be fixed assets.

Examples of Fixed Assets > Buildings > Equipment > Furniture > Vehicles > Computers > Land > Goodwill > Brand recognition > Copyrights > Patents > Trademarks > Trade names > Customer lists

Fixed asset management is an accounting process that tracks fixed assets for financial accounting, preventative maintenance, theft deterrence, and business valuation.

Business owners need to document each fixed asset’s depreciation status to know what to report on your business tax return. Here are some positive 2018 tax changes that will affect that.

100% Expensing

A provision in the new Tax Cuts and Jobs Act law allows 100% expensing of certain assets. If an asset was acquired prior to September 28th, 2017 and placed into service after September 27th, 2017, it would qualify for 50% expensing. In comparison, assets acquired and placed into service after September 27th, 2017 would qualify for 100% expensing. Section 168(k) of the new law specifies the assets that qualify.

Increases in Allowable Section 179 Asset Expensing

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.

Big Change for Passenger Vehicle Depreciation

If 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 ( it was $1,875), until the vehicle is fully depreciated.

There are more tax ramifications on fixed assets yet these above are the most significant. Your OFWF CPA knows the ins and outs of these changes and is happy to discuss how they affect your business. Call today (402) 592-3800.

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