Tax Extenders in 2020

By Bob McElroy, Certified Trainer, Sage University

The textbook that we use to teach Principles of Fixed Assets Accounting, one of the classes offered through Sage U, is currently being revised.  This new textbook revision will include the new tax extenders in 2020.  Here below is a recap of these updates to applicable tax law.

Section 179

The expense limit will be $1,040,000 in 2020.  As a review, here’s how that new figure will compare with recent limits:

Tax Yr beginning in:

Max Exp Deduction

2016

$500,000

2017

$510,000

2018

$1,000,000

2019

$1,020,000

2020

$1,040,000

 

The investment cap will be $2,590,000 in 2020. 

As a review, for every dollar this figure is exceeded through the purchase of qualifying assets, the expense deduction limit (see paragraph above on the expense limit) is reduced by a dollar.  Thus, if the taxpayer buys new qualifying assets of $3,630,000 ($1,040,000 + $2,590,000) in 2020, the deduction is reduced to zero, and the taxpayer no longer qualifies for the Section 179 expense deduction.  Here’s how that new figure will compare with recent limits:

 

Tax Yr beginning in:

Investment Limit

2016

$2,010,000

2017

$2,030,000

2018

$2,500,000

2019

$2,550,000

2020

$2,590,000

 

The American Jobs Creation Act of 2004 limited the amount of the deduction that could be taken on an SUV to $25,000.  And for a long time, it remained at $25,000.  And then the Tax Cuts and Jobs Act of 2017 indexed this deduction to inflation rates beginning in 2019.  As a result, the maximum SUV deduction allowed under Section 179 in 2019 was $25,500.  For 2020, that limit has been raised to $25,900.

Limits on Light Vehicles – Automobiles (A) and Light Trucks & Vans (T)

In accordance with IRS Revenue Procedure 2019-26, “. . .  the term ‘passenger automobiles’ includes trucks and vans.”  And thus, uniform depreciation limits apply to automobiles and light trucks and vans with a GVWR of 6,000 pounds or less.

 

As a review, here are the limits that apply to light vehicles:

 

Max Depr (*includes bonus depreciation)

PIS

Yr 1

Yr 2

Yr 3

Yr 4

Add’l Yrs

2018

$18,000*

$16,000

$9,600

$5,760

$5,760

2019

$18,100*

$16,100

$9,700

$5,760

$5,760

2020

$18,100*

$16,100

$9,700

$5,760

$5,760

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