Tax opportunities and calculating adjusted depreciation under the CARES Act... having the right fixed asset solution is key!

Apr 21 2020

It can be a daunting task to keep up with the federal tax changes, especially when changes are made right at tax season. Yet in times like today, it becomes critical to take advantage of every opportunity to manage the value of the business’s assets and to maximize those refund opportunities.

The TCJA and CARES Act

In the TCJA of 2017, an error was made when the legislation failed to designate “qualified improvement property” (QIP) as 15-year Modified Accelerated Cost Recovery Systems (MACRS) property.  The CARES Act (March 2020) while primarily focused on COVID-19 relief measures, did take time to remove the error from TCJA 2017 and now designates QIP as 15-year MACRS property and assigns a 20-year life if an Alternative Depreciation System (ADS) is elected or required. Significantly, this amendment is made retroactive to 2018, as if originally included in TCJA 2017.  As usual there are some rules and tests that must be passed that will allow you to choose the correct path forward.

Is your fixed asset solution set up to take advantage of these new tax opportunities?

Due to the long awaited correction to TCJA 2017, many organizations are now looking to seize the moment but how easy is it to make the necessary adjustments in your fixed asset system?

In many instances where the functionality and features are not readily in place to deal with historical changes, be it a spreadsheet or specialist solution, it will involve a long and drawn out process at a time that most can ill afford.

Being able to set up an updated depreciation method (ADS) within a few clicks is the least to be expected from a good fixed asset system. Below are just some other features that should be available to ensure a quick and easy process:

  • Ability to change the useful life of the asset.
  • Apply the bonus depreciation to the newly Qualified Improvement Property (QIP).
  • Update assets to reflect the appropriate tax rule over the defined period of time.
  • Recalculate depreciation for the previous year via a bonus depreciation method.
  • Make changes to assets in mass, both for life change events and the bonus depreciation actions.

 Having the right fixed asset accounting solution in place can be a key factor to helping your organization navigate through these uncertain times. If you are struggling to manage these new opportunities with your existing system, contact Real Asset Management at solution@realassetmg.com. We would be happy to help...