Important Things to Consider Before Filing Your Taxes!

[Julio Gonzalez]

The CARES Act was effective in 2020, however a lot of the tax laws and rules that were passed are still able to be utilized for your 2021 taxes. Here are some of the key changes that occurred as a result of the CARES Act and my comments and/or strategies for how to take advantage of these strategies.

BONUS DEPRECIATION

Prior to the CARES Act: 100% Bonus depreciation if in service after September 2017.

After the CARES Act: 100% Bonus Depreciation with a new 5 year carryback option

Comments/Strategies: Review all section 179 and 179D energy tax deduction and cost segregation opportunities to generate possible refunds and an NOL gives they can be carried back.

QUALIFIED IMPROVEMENT PROPERTY (QIP)

Prior to the CARES Act: Not eligible for bonus depreciation or accelerated depreciation.

After the CARES Act: QIP property now is depreciated over 15 years which allows improvements to be expensed immediately since they are now eligible for 100% bonus depreciation.

Comments/Strategies: Since it's retroactive, CPAs and taxpayers must determine the best option to go back and claim this. In some cases you may need to file a 3115 and other cases, it may result in amended returns.

179D ENERGY TAX DEDUCTION

Prior to the CARES Act: $1.80 per square foot for all residential properties with 4 stories or more, commercial buildings and both new construction and improvements of HVAC, new lighting, windows, and roof.

After the CARES Act: The same as prior plus a new 5 year carryback option.

Comments/Strategies: Review all 179D opportunities to generate possible retroactive refunds and immediate tax savings.

45L ENERGY TAX CREDITS

Prior to the CARES Act: $2,000 tax credit per unit for multifamily, residential and new construction/substantial improvements retroactive 2016-2020.

After the CARES Act: The same as prior plus a new 5 year carryback option.

Comments/Strategies: Review all 45L opportunities to generate possible retroactive refunds and immediate tax savings as tax credits generally can be carried back one year and forward 20 years.