IRS releases guidance regarding expensing rules

January 8, 2019

On Dec. 21, 2018, the IRS released Revenue Procedure 2019-08, guidance related to rules for deducting expenses under Section 179 and depreciation under Section 168 under the Tax Cuts and Jobs Act (TCJA), which was enacted into law in December 2017. NRCA was pleased the TCJA expanded the definition of qualified real property eligible for full expensing under Section 179 to include improvements to nonresidential roofs. This was a significant victory for NRCA after working for years to educate lawmakers regarding the economic benefits of improved tax treatment of roofs.

This guidance provides information for taxpayers highlighting the updated limits for Section 179 expensing (which includes nonresidential roofs), as well as guidance regarding depreciation periods for residential rental property and alternative methods of accounting for that property. View the IRS guidance regarding expensing rules.

Section 179 allows taxpayers to immediately expense the cost of qualifying property rather than recovering such costs over multiple years through depreciation. The TCJA significantly expanded the expensing limits under Section 179, with the maximum amount a business may expense increased to $1 million and the phase-out threshold increased to $2.5 million. These limits were effective for properties placed in service in taxable years beginning after Dec. 31, 2017, and this guidance from the IRS provides updated limits after being indexed for inflation starting in 2019. For taxable years beginning in 2019, the maximum amount a business may expense is now updated to $1.02 million and the phase-out threshold increased to $2.55 million.

NRCA members who want to educate customers regarding the benefits of including nonresidential roofs as qualifying property for Section 179 can use NRCA's template letter. NRCA always recommends consulting a tax professional when dealing with tax laws and regulations.