Reduce Your 2014 Federal Tax Liability by Purchasing Business Equipment Before the End of the Year

The following is a guest post from Brent Baxter, a Tax Partner at Comyns Smith McCleary & Deaver LLP. Please visit them for financial assistance & advice at http://www.csmllp.com.

The Senate voted 76-16 on December 16, 2014 to approve a one-year retroactive extension of most, but not all, of the temporary tax deductions, credits, and incentives that expired on December 31, 2013. The approved extenders bill, which cleared the House of Representatives on December 3, now heads to the White House for President Obama’s signature.

The Tax Increase Prevention Act extends many business tax incentives for one year retroactively to January 1, 2014. Without further Congressional action, the incentives will expire December 31, 2014. These extenders include two provisions which provide businesses accelerated deductions for purchased business equipment:

Bonus Depreciation—Bonus depreciation allows taxpayers to claim an additional first-year depreciation deduction. The Tax Increase Prevention Act of 2014 extends 50-percent bonus depreciation through 2014. Qualified property must be depreciable under the Modified Accelerated Cost Recovery System (MACRS) and have a recovery period of 20 years or less. Property must be new and placed in service before January 1, 2015.

Code Sec. 179 Expensing—Enhanced Code Sec. 179 allows taxpayers to immediately deduct, rather than gradually depreciate, the cost of qualified assets, subject to certain limitations. The extenders bill increases the Code Sec. 179 dollar limit to $500,000 from $25,000 and increases the overall investment limit to $2,000,000 from $200,000. Both of the provisions described above are set to expire on December 31, 2014. Absent additional Congressional action, bonus depreciation will not be available for 2015 purchases and the Code Sec. 179 limits will reset to the maximum expensing amount of $25,000 with an investment limit of $200,000.

If you are planning to invest in new equipment, you should consider making the purchase before the end of the year to take advantage of the tax incentives described above.

If you have any questions about Section 179 expensing or the bonus depreciation, please contact Brent Baxter at brent@csmllp.com.

DISCLAIMER: This information does not constitute legally-binding professional tax advice. Please check with your accountant.