Bonus Depreciation and Section 179 Expense
Here’s something to consider — put new business equipment and machinery in service before year-end to qualify for the 50% bonus first-year depreciation allowance. Unless Congress acts, this bonus depreciation allowance generally won't be available for property placed in service after 2012. However, certain specialized assets may be placed in service in 2013.
Also, consider making purchases that will qualify for the Section 179 business property expensing option. The maximum amount you can expense for a tax year beginning in 2012 is $139,000 of the cost of qualifying property placed in service for that tax year. The $139,000 amount is reduced by the amount by which the cost of qualifying property placed in service during 2012 exceeds $560,000, which is called the investment ceiling.
For tax years beginning in 2013, unless Congress makes a change, the expensing limit will be $25,000 and the investment ceiling will be $200,000.
So, if you anticipate needing property in early 2013, you may want to push the purchase into 2012 to gain a higher expensing deduction, if you are otherwise eligible to claim it. The time of purchase doesn't affect the amount of the expensing deduction. You can purchase property late in the year and still get a full expensing deduction. So, property acquired and placed in service in the last days of 2012, rather than at the beginning of 2013, can result in a full expense deduction for 2012.
If you are in the market for a business car, and your taste runs to large, heavy SUVs, consider buying in 2012. You may be able to write off most of the cost of the heavy SUV this year due to a combination of favorable depreciation and expensing rules. Next year, the write-off rules may not be as generous.
Disclaimer: The items included in the Tax Update Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
