High Gravity Depreciation Deductions
High Gravity Depreciation Deductions for 2015 and Beyond!
Purchase new brewing equipment in 2015?
We have big news if you did. In December of last year, Congress expanded the depreciation expensing election from $25,000 to $500,000 and made the law permanent. That’s just the beginning though as additional first-year bonus depreciation was extended for 2015 through 2019.
How about improvements to your facility/real estate? Expansion plans?
Big write-offs may be in store for your business here as well! “Qualified Improvement” write-offs were extended for 2015 and greatly enhanced for 2016. The recently enacted "Protecting Americans from Tax Hikes Act of 2015" (PATH) provides some exceptional tax planning opportunities for breweries:
Opportunity 1: Code Section 179 (immediate expensing election)
PATH retroactively increased the deduction from a maximum of $25,000 for 2015 to $500,000. The increase was made permanent so it applies for 2016 and every year thereafter – being indexed for inflation.
Generally this provision applies to new or used equipment, however, there are special provisions that might allow your brewery to deduct "Qualified Real Property Improvements". These include improvements made to property subject to a lease that is not to a "related party". It also includes improvements made to your restaurant/pub area whether leased or owned.
Opportunity 2: Bonus Depreciation
Bonus Depreciation was also extended retroactively for 2015 and while not made permanent, extended and "super-sized" for years 2016 - 2019 as it relates to real property improvements to your production area. Bonus depreciation, unlike Section 179 expensing, applies only to new property and allows a 50% immediate deduction rather than 100% (expensing). Important advantages, however, are that there are no limits to the annual amount.
For 2016 -2019 any improvements to an interior portion of a building other than the internal structural framework of the building, whether your own or lease the property, quality for bonus depreciation. Bonus depreciation will be allowed at 50% for 2015-2017, 40% for 2018 and 30% for 2019. It then goes away.
If you have made or plan to make improvements to your facility, you should talk to one of our tax professionals to discuss these special advantages. Call the Brewers Professional Alliance at 855-616-BREW.