Year End Tax Planning Challenges Part 2

We are continuing our discussion from last week on year-end tax planning challenges. Businesses that have benefited from the generous $500,000 Code Sec. 179 expensing limit for tangible personal property (and certain software) for the past few years may be in for a shock this year. Starting with the 2014 tax year, unless Congress makes a retroactive change, the maximum annual Code Sec. 179 expensing limit drops precipitously to $25,000. The dollar limit on the phaseout of the Code Sec. 179 deduction also drops sharply. Congress might pass a retroactive increase to the $25,000 limit, but as of the date of this release, there's no way to be sure whether the expensing limit will increase. There's also no way to know when it could happen or by how much. Under Code Sec. 179, taxpayers, except trusts, estates and certain noncorporate lessors, can elect to expense (deduct in lieu of depreciation) the cost (subject to certain dollar limits) of “section 179 property.” For tax years beginning in and after 2014, the maximum amount that can be expensed is $25,000. However, the maximum amount that could have been expensed for tax years beginning in 2012 and 2013 was $500,000. For tax years beginning in 2014 and later, the maximum annual expensing amount (the investment ceiling) generally is reduced dollar-for-dollar by the amount of section 179 property placed in service during the tax year in excess of $200,000. However, for tax years beginning in 2012 and 2013, the investment ceiling was $2 million. This is definitely an area that we hope Congress addresses right after the November election.

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Disclaimer: The items included in the Tax Tip Tuesday Video 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

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