CARES Act Corrects Depreciation Error, Unlocks New Cost Recovery Opportunity

Feb 28, 2022
Tax and Accounting

Welcome to Life Designers, a leading provider of consulting and coaching services in the business and consumer services industry. In this article, we will delve into the impact of the CARES Act on depreciation errors and how it presents a new cost recovery opportunity for businesses.

The Importance of Proper Depreciation

Depreciation is a vital accounting process that allows businesses to allocate the cost of their assets over their useful life. It reflects the gradual wear and tear, obsolescence, or decline in value of these assets. Accurate depreciation calculations are crucial for financial reporting and tax purposes.

However, an error in the Tax Cuts and Jobs Act (TCJA) led to a costly mistake in the depreciation deduction for certain qualified improvement property (QIP). This error inadvertently classified QIP as 39-year property instead of 15-year property, rendering it ineligible for accelerated depreciation under bonus depreciation rules.

The CARES Act Corrects the Error

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in response to the COVID-19 pandemic, includes provisions that rectify the QIP depreciation error. The CARES Act retroactively corrects the classification of QIP as 15-year property, allowing businesses to recover the costs over a shorter period through accelerated depreciation methods.

This correction is significant as it provides businesses with an opportunity to amend past tax returns and claim the missed depreciation deductions. The additional tax savings generated from the corrected depreciation can provide much-needed financial relief, especially during these challenging times.

Unlocking a New Cost Recovery Opportunity

With the corrected depreciation classification, businesses now have the ability to accelerate their cost recovery and improve cash flow. The CARES Act allows for 100% bonus depreciation, which means that qualified businesses can deduct the full cost of eligible assets immediately.

By taking advantage of bonus depreciation, businesses can significantly reduce their taxable income and potentially receive refunds for prior years. This newfound flexibility can aid in capital investment decisions, expansion plans, and overall financial planning.

How Life Designers Can Help

At Life Designers, our team of experienced consultants and coaches specialize in assisting businesses in navigating complex tax regulations and maximizing opportunities for growth and cost recovery. We stay up-to-date with the latest legislations, such as the CARES Act, to provide our clients with valuable insights and strategic guidance.

Our comprehensive services include:

  • Cost recovery analysis
  • Depreciation strategy development
  • Tax planning and optimization
  • Financial analysis and forecasting
  • Business expansion strategies
  • Cash flow management

Let our team of experts help you unlock the full potential of the CARES Act's correction on depreciation errors. By leveraging our services, you can optimize your cost recovery, enhance your financial position, and propel your business forward.

Contact Us Today

Ready to capitalize on the new cost recovery opportunity presented by the CARES Act? Contact Life Designers today to schedule a consultation with one of our experienced consultants. We are here to empower your business and help you thrive in today's ever-changing economic landscape.

Keywords: life design consulting, coaching, CARES Act, depreciation error, cost recovery opportunity