On The Right P.A.T.H.


The “Protecting Americans from Tax Hikes (PATH) Act of 2015.”

Signed into law on December 18, 2015, the PATH Act makes permanent the enhanced Code Sec. 179 expensing and phase-out limits; and 15-year write-off for qualifying leasehold improvements. In addition, the Act provides for a retroactive extension of a host of other depreciation provisions for businesses that had expired at the end of 2014, including the extension of 50% bonus first-year depreciation.

Here are some of the details:

SECTION 179: The Act retroactively extends and makes permanent the $500,000 expensing limitation and $2 million phase-out amounts.  If you spend more than $2M, you can’t take Section 179.  Also, you may not use Section 179 to create a taxable loss.  Any unused amount carries forward.  Both the $500,000 and $2 million limits are indexed for inflation after 2015.

LEASEHOLD IMPROVEMENTS:  This is huge!  The Act retroactively extends and makes permanent the inclusion of qualified leasehold improvement property in the 15-year depreciation schedule (previously 39-years).  And, qualified leasehold improvements are eligible for Section 179 expensing ($250,000 in 2015 & $500,000 after 2015).  Qualified leasehold improvements are those made by or for a lessee/renter, not an owner/user.  Dentists who rent space will depreciate improvements over 15 years but those who own their space (dental condo, free-standing building, partnership interest, etc.), must still use a 39 year depreciation schedule.  Therefor, it is important for owner/dentists to have a Cost Segregation Study performed to re-allocate improvements into shorter depreciation categories as appropriate.

BONUS DEPRECIATION:  The immediate expensing of new assets placed into service that have existed in a variety of forms since 2001 will end after 2019.  It will be 50% for 2015, 2016 and 2017 before going down to 40% in 2018 and 30% in 2019.

There is much more included in the new legislation but these are the primary tax attributes of importance to dentists.


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