Regulation · 2019
T.D. 9874 (First Final TCJA Bonus Regs)
T.D. 9874, 84 Fed. Reg. 50108 (Sept. 24, 2019); 26 CFR 1.168(k)-2
Treasury decision
Audio summary
A short audio walkthrough of this rule: what it says and why it matters for your study.
What it holds
T.D. 9874 finalized the first set of TCJA bonus depreciation regulations. It set the rules for which property qualifies, including used property acquired after 2017. It also established the binding-contract rule, the placed-in-service rule for self-constructed property, and the mechanics for the elections under Section 168(k)(5), (7), and (10).
Why it matters for your study: This Treasury decision is the core regulatory framework that decides whether cost-segregation-identified components qualify for 100% bonus depreciation. The qualified-property rules and election mechanics here govern every study involving property placed in service after September 27, 2017.
Where this comes from
The Tax Cuts and Jobs Act of 2017 expanded bonus depreciation to 100% and opened it to used property for the first time. These changes were major, and the IRS needed detailed regulations to explain how the new rules worked in practice.
T.D. 9874 was issued on September 24, 2019 and published at 84 Fed. Reg. 50108. It finalized the proposed rules in REG-104397-18 (with modifications). The codified regulation is at 26 CFR 1.168(k)-2.
What it established
The regulation covers three main areas.
First, it defines which property is 'qualified property' eligible for bonus. This includes new and used depreciable property with a MACRS recovery period of 20 years or less. Used property qualifies only if it was not previously used by the same taxpayer and not acquired in a related-party or carryover-basis transaction.
Second, it provides timing rules. The binding-contract rule says property is not 'acquired' under the new TCJA rates if the taxpayer had a written binding contract for the property before September 28, 2017. The placed-in-service and self-constructed property rules give similar guidance for buildings built by the taxpayer.
Third, it explains the elections. Under Section 168(k)(7), a taxpayer can elect out of bonus for all property in a class. Under 168(k)(10), a taxpayer can elect 50% instead of 100% for the first year TCJA was effective. Under 168(k)(5), certain plants can qualify for a different bonus rule.
How it shows up in a study
Every cost segregation study involving property placed in service after September 27, 2017 depends on T.D. 9874. The regulations decide whether the personal property and land improvements identified in the study are 'qualified property' that can receive 100% bonus.
When a client acquired property under a contract signed before September 28, 2017, the binding-contract rule in T.D. 9874 can limit or eliminate bonus eligibility. A qualified study flags this and runs the analysis.
What it does not mean
T.D. 9874 was partially superseded by T.D. 9916, which finalized additional rules for the component election and related matters. The core qualified-property and election rules in 1.168(k)-2 remain in force, but you must check both T.D. 9874 and T.D. 9916 together for a complete picture.
Following these regulations also does not guarantee bonus eligibility for every item in a study. The underlying classification work, whether a component is personal property or a structural component, is a separate analysis governed by the MACRS asset class rules and case law.
Primary source
Read the official text for yourself, or share it with your advisor.
- Category
- Bonus depreciation & expensing
- Applies to
- All property types
- Status
- Vetted
This page explains a tax authority in plain words. It is not tax advice for your situation. The way this authority applies to your property is reviewed by a licensed tax professional. Citation is provided so you or your advisor can read the primary source.