A Nice Bonus from Congress

Looks like the trucking industry got a little gift from Congress late last year with the extension of Bonus Depreciation through 2019. It was a nice switch from the previous year-by-year extensions which made planning difficult.

Here is what Congress said: for 2015 through 2017, bonus depreciation is 50% and then phases down to 40% in 2018 and 30% in 2019. It was part of the overall tax extenders package passed by Congress on December 18.

Kenneth Mains, chief financial officer of Hogan Truck Leasing, St. Louis, Mo., a NationaLease member, says this is a positive change in that it allows fleets and other businesses to do some proactive procurement planning and tax planning because they know that Bonus Distribution is in place for the next several years.

“As bonus depreciation is only specific to new property — used trucks are ineligible — it may spur some purchases in 2016 and 2017,” he says.

Since the rates drop from 50% to 30% and then expire beyond 2019, fleets may want to consider changing their trade cycle to take advantage of the higher depreciation rate available during the next two years.

Vanessa Ciervo, finance manager of H. K. Truck Center in South Plainfield, N.J., a NationaLease member, observed, “Bonus Deprecation being extended is just as important to our retail customers who purchase from us on the dealership side as it is to our own rental and leasing division. This extension is exciting for all types of businesses who can now free up cash to put back into their business and their growing fleets.”

Mains says there are some other positive impacts to the modification of Bonus Depreciation that took effect with the passage of the extender. They include the fact that after 2015 the provision allows additional first-year depreciation for qualified improvement property without regard to whether the improvements are property subject to a lease.

 It’s always a bonus to receive a gift and this one is especially appreciated since we were expecting the usual one-year extension. As Mains says, “It is more impactful due to the longer extension period even with the phase down in percentages.”

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