Several favorable business tax provisions have a limited shelf life that may dictate taking action between now and year-end. They include the following.
Generous Section 179 Deduction Rules
Your business may be able to take advantage of the temporarily increased Section 179 deduction. Under the Section 179 deduction privilege, an eligible business can often claim first-year depreciation write-offs for the entire cost of new and used equipment, software additions and eligible real property costs. For tax years beginning in 2013, the maximum Section 179 deduction is $500,000, including up to $250,000 for qualifying real property costs. For tax years beginning in 2014, however, the maximum deduction is scheduled to drop back to only $25,000, and most real property costs will be ineligible.
Note: Watch out if your business is already expected to have a tax loss for the year (or is close to it) before considering any Section 179 deduction, because you cannot claim a Section 179 write-off that would create or increase an overall business tax loss.
50% First-year Bonus Depreciation
Above and beyond the Section 179 deduction, your business can also claim first-year bonus depreciation equal to 50% of the cost of most new – not used – equipment and software placed in service by December 31 of this year. For a new passenger auto or light truck that’s used for business and is subject to the luxury auto depreciation limitations, the 50% bonus depreciation break increases the maximum first-year depreciation deduction by $8,000. The 50% bonus depreciation break will expire at year-end unless Congress extends it.
To learn how this might affect your business, call us today at 206-386-5455 or send us an email. Our initial consultation is complimentary.
To your wealth,
Joe Maas, CFA, AVA, CFP®, ChFC, CLU®, MSFS, CCIM
President of Synergetic Finance