Full Expensing of Fixed Assets Back in Play for Auto Dealers

Tax Reform Insight

Auto dealers may be able to expense 100% of eligible fixed assets on 2018 tax returns, but specific action is required to avoid inadvertently limiting benefits in the future.

The Joint Committee on Taxation, a nonpartisan committee of the US Congress, published the Bluebook on December 20, 2018, providing clarification on the Tax Cuts and Jobs Act. The Bluebook is, in effect, a postenactment analysis of the new tax law that can provide important insight into the legislative intent behind the new rules. While the Bluebook is not official legislative history, the IRS and US Department of the Treasury often look to the Bluebook when drafting regulations and other guidance implementing new tax laws. 

Outlook for Dealers

Notably, the Bluebook addresses the ability of dealers with floor plan interest to take bonus depreciation. Examples included in the text suggest that dealers can choose to deduct floor plan interest in excess of the otherwise allowable deduction or take 100% bonus depreciation. This is positive news for the automotive industry. Prior to the release of the Bluebook, bonus depreciation was an area of concern for dealers with significant fixed assets, specifically service loaners and rental fleets.   

For now, dealers should proceed with caution until the release of final regulations, which are expected in the coming months.

We’re Here to Help

As a result of this news and other provisions of the law, your 2018 tax return is a critical filing that may carry long-term tax consequences. To understand how these new insights may impact your business and the actions you need to take, please contact your Moss Adams professional.

You can also schedule a time to meet with our tax advisors at the NADA Show 2019 at Booth 7323W in San Francisco January 25–27.

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