Impact of 2017 Tax Reform on Section 179 Accelerated Depreciation

With the 2017 tax bill now approved by Congress, we have clarity on how investing in capital goods will be handled and the 2018 impact on Section 179 and Bonus Depreciation for convenience stores and commercial fueling.  

Section 179 and Bonus Depreciation originated during the economic crisis as an incentive for businesses to invest in equipment by allowing depreciation to be captured in the year of purchase, rather than over the useful life of the equipment.  With the 2017 tax reform bill, these incentives have been expanded.  In combination with lower tax rates for many businesses, the environment for investing in your business may make adding new equipment a wise decision for 2018. 

Section 179 changes for 2018:  In the 2018 tax year, a permanent increase in the annual deduction from $500,000 to $1,000,000 takes effect. Section 179 covers both new and used equipment, including most fueling and convenience store equipment used in retail and commercial fueling operations.  Section 179 eligible equipment has been expanded to include improvements to nonresidential property (HVAC, roofs, etc).  Additionally, the maximum eligible amount of $1 Million will increase based on an inflation index starting in 2019.

Tax Reform Act Changes to Bonus Depreciation in 2018:  The most significant changes are the removal of the previous $2,000,000 cap and the 50% deduction allowance.  With the new tax bill, most equipment placed into service after Sept. 27, 2017 can qualify for 100% deduction under this tax treatment, potentially providing cash flow benefits and other advantages for convenience store operators.  Additionally, bonus depreciation may now be claimed for used equipment.  The provisions are in full effect (100% deduction) through December 31, 2022 and are scheduled to phase out through December 31, 2026.

Combining these income tax benefits with today’s low-interest rate environment may make 2018 a good time to invest in upgrading your site for EMV payment at the pump, underground storage tank (UST) improvements or adding DEF or other alternative fuels including E-85 to your site.

Please consult your tax professional for advice related to your specific situation.