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Treasury and IRS Issue Proposed Expensing Regulations

Treasury and IRS Regulations

The Treasury Department and Internal Revenue Service on August 3 issued proposed regulations to implement 100 percent expensing of business assets. While full expensing does not apply to multifamily structures, it can be beneficial to property placed in units that is depreciated separately from the building or for equipment used to support a multifamily business. For example, the IRS notes that “machinery, equipment, computers, appliances and furniture generally qualify.” Instead of depreciating such eligible property over a number of years, it can now be fully written off in the year of purchase.

Enacted as part of the Tax Cuts and Jobs Act, full expensing is available for business investments of new or used property with a class life of 20 or fewer years placed in service after September 27, 2017, and before January 1, 2023.

Once 100 percent expensing expires at the end of 2022, the Tax Cuts and Jobs Act phases down expensing for assets placed in service through 2026. The following percentage of an asset may be expensed (with the remainder depreciated) in each of these years:

  • 2023: 80 percent
  • 2024: 60 percent
  • 2025: 40 percent
  • 2026: 20 percent