Pub. 16 2017-2018 Issue 4

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E N O . 1 , 2 0 1 8 16 new jersey auto retailer TAX REFORM  continued from page 15 shareholder’s share of items of income, gain, deduction, or loss of the partnership or S corporation is taken into account in applying the limitation for the tax year of the partner or S corporation shareholder. Cost Recovery Changes The tax bill provides accelerated deductions for business property acquisitions: Section 179 expensing. The maximum amount a taxpayer may expense is increased to $1 million and the phase-out threshold is increased to $2.5 million. Section 179 expensing is available for qualified real property. Qualified real property means qualified improvement property (see description below) and the following improvements to nonresidential real property: roofs, heating, ventilation and air-conditioning property, fire protection and alarm systems, and security systems. 100 percent cost recovery of qualifying business assets is al- lowed for new and used property. Section 168(k), com- monly known as “bonus depreciation” was enhanced to allow for 100 percent expensing of qualifying assets acquired and placed in service after September 27, 2017. Deal- erships that have floorplan indebtedness are not eligible to deduct “bonus depreciation” for assets placed in service after December 31, 2017. Recovery period for real property shortened. A general 15-year recovery period and straight-line depreciation are provided for qualified improvement property (QIP). QIP is any improvement to an in- terior portion of a building which is non-residential real property if the improvement is placed in service after the date the building was first placed in service (excludes any enlargement of the building, any elevator or escalator or improvements to the internal structure of the building). Due to an apparent oversight by the drafters of the legis- lation, the provision generally describing the property to which a 15-year recovery period applies was not amended to include QIP. QIP placed in service on or after January 1, 2018 is recovered over 39 years and is not bonus eligible until such point as a technical correction to the new law is enacted. These are some the key tax law changes affecting auto dealer- ships but isn’t meant to address EVERY aspect that may affect your business. Careful planning will be necessary for most auto dealers to take advantage of favorable provisions while avoiding limitations, exceptions and imperfections in the legislation. In addition, technical corrections and regulations related to the tax bill will be forthcoming and must be incorporated into your overall tax planning process. Rochelle Kimmins, CPA, CFP is Tax Director at WithumSmith+Brown, PC in Edison, New Jersey. She can be reached at 732.379.5200 or rkimmins@withum.com.