The “American Taxpayer Relief Act of 2012” reinstated a variety of favorable tax deductions for assets placed in service through December 31, 2013. These tax incentives are valuable for hospitality owners and are not just limited to fixed assets; improvements to buildings and the costs of buildings meeting either the qualified leasehold improvements or qualified restaurant property criteria could be eligible for these advantageous deductions, but you must act quick to take advantage of them.
Below is a summary of the first-year depreciation deductions hospitality owners can take advantage of between now and December 31st 2013, and what the tax law changes are expected to be effective January 1st 2014:
Section 179 enables business owners to deduct the full cost of fixed assets acquired and placed into service, including equipment, computers, vehicles, furniture, and fixtures, but excluding real property and most improvements. The deduction can be claimed for acquisitions of both new and used assets.
50% Bonus Depreciation
50% bonus depreciation enables business owners to deduct half the cost of a fixed asset acquired and placed into service. Qualifying fixed assets must be brand new and may include equipment, computers, vehicles, furniture, fixtures, and qualified leasehold improvements.
Qualified Leasehold Improvements
A qualified leasehold improvement is any improvement meeting all criteria below:
Qualified Restaurant Property
Qualified restaurant property is a building or improvements to a building where 50% of the building’s square footage is devoted to the preparation of, and seating for, on-premises consumption of prepared meals. Even if a restaurant is operating in a portion of a building or a space in a shopping center, it’s 50% of the entire building that must be devoted to the restaurant’s use in order for the building or improvement additions to meet the criteria for a qualified restaurant property. Establishments that will benefit from this provision are primarily stand-alone restaurants.