On December 22 2017, President Trump signed into law H.R. 1, the “Tax Cuts and Jobs Act,” a sweeping tax reform law that promises to entirely change the tax landscape.
The business tax changes that are made under the Act, include a reduction in the corporate tax rate to a flat 21%; an increase in Code 179 expensing to $1 million; a temporary 100% first year qualifying business asset deduction; a 5-year write-off period for R&D expenses; a limitation on the deduction for business interest, and elimination of the domestic production activities deduction.
Most of the changes will drive process changes to reporting tax data from SAP but the depreciation changes will also drive configuration changes. The highlights to be considered are:
- A 100% first-year deduction for the adjusted basis is allowed for qualified property acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023
- After January 2023, there is a phased down write-off of 20% per year, each year through 2026
- For passenger automobiles placed in service after Dec. 31, 2017, in tax years ending after that date, for which the additional first-year depreciation deduction under Code Sec. 168(k) is not claimed, the maximum amount of allowable depreciation is increased to: $10,000 for the year in which the vehicle is placed in service, $16,000 for the second year, $9,600 for the third year, and $5,760 for the fourth and later years in the recovery period.
These changes must be configured in Asset Accounting in SAP. Feel free to contact us at Serio if you have questions or need some help changing your SAP system to accommodate the new law.