The IRS is allowing a simplified method for taxpayers to claim bonus depreciation for qualified improvement property placed in service in 2018 or 2019. (Rev. Proc. 2020-25) This helps taxpayers take advantage of the CARES Act provision classifying qualified improvement property as 15-year property, retroactive to property placed in service in 2018, and allowing bonus depreciation for such property.
Rather than filing an amended return to claim bonus depreciation for the year the property is placed in service, the taxpayer may file a Form 3115, Application for Change in Accounting Method, in the subsequent year (e.g., in the 2019 taxable year if the property was placed in service in 2018), and claim an IRC §481(a) adjustment in that subsequent year. Essentially, this allows a taxpayer to claim the bonus depreciation in the year after the property is placed in service.
For assets placed in service in 2019, we recommend that taxpayers file a superseded return to claim the bonus depreciation if they have already filed the 2019 return.
The Revenue Procedure provides detailed guidance as to how the Form 3115 should be completed and also addresses other depreciation elections, or election revocations or withdrawals, that taxpayers may want to make as a result of various changes in the CARES Act. These provisions will be covered in detail in our Post-Tax Season Update and Review webinar.
Rev. Proc. 2020-25 is available at:
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