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Specialty Tax Spotlight – Placed-in-Service Date

Video
Discover the importance of placed-in-service dates and how tax rules impact depreciation in this Specialty Tax Spotlight with Sean Muller and Ralph Ferrales.
October 10, 2024
Sean Muller
Sean Muller
Partner-in-Charge, Specialty Tax Services
Rafael Ferrales
Rafael Ferrales
Managing Director, Cost Segregation

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Specialty Tax Spotlight

In this episode of Weaver: Beyond the Numbers, Specialty Tax Spotlight, Sean Muller and Ralph Ferrales dive into the concept of placed-in-service dates and the impact on tax planning, particularly for bonus depreciation. This discussion explores the distinctions between book and tax treatments for asset depreciation and how organizations can maximize tax benefits by understanding the nuances of placed-in-service rules.

Understanding when these assets are “ready and available for use” can unlock significant tax deductions, whether you’re managing large equipment or real estate assets.

Key Points:

  • Recognizing the difference between GAAP and tax treatment for placed-in-service dates can lead to earlier depreciation.
  • Bonus depreciation is phasing out, and accurate planning around placed-in-service dates can maximize tax savings.
  • Documentation, like certificates of occupancy or delivery slips, is crucial to support your placed-in-service date in case of an audit.

 

Muller and Ferrales highlight how businesses often overlook the differences between GAAP and tax rules when determining placed-in-service dates, which can impact the timing of deductions. They emphasize the importance of reviewing these dates carefully, especially in the current environment of declining bonus depreciation.

“For tax purposes, the placed-in-service date is all about when the asset is ready and available for use, not necessarily when it starts producing income,” Ferrales said. The hosts discuss how taxpayers can ensure they are correctly documenting placed-in-service dates for both buildings and equipment, helping mitigate risks in an IRS audit.

The discussion highlighted how ignoring the placed-in-service date, especially with the gradual phasing out of bonus depreciation, could lead to a significant drop in potential deductions. It’s important for businesses to review the placed-in-service dates before filing returns as it can create a substantial impact on their tax liabilities.

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