By the DynaSis Team
In case you have forgotten, the $500,000 Section 179 tax deduction, which was extended to 2013 through approval of H.R. 8: American Taxpayer Relief Act of 2012, has not been carried over for 2014. Although Congress is considering extending the bonus depreciation rules for another three years, it’s pretty obvious that they won’t extend the Section 179 deduction above its base threshold of $25,000 (with a $200,000 investment ceiling) before the beginning of 2014. U.S. business owners could easily be left in limbo for the majority of 2014―as they were in 2012―before Congress decides to take action retroactively.
A much better option, tax experts say, is for businesses to take advantage of the 2013 Section 179 tax deduction while they have it. The Section 179 deduction covers most new and used capital equipment―in fact, most depreciable assets that have less than a 20-year life. It also includes certain software.
The 2013 Section 179 Deduction Limits for 2013 (and 2012 retroactive)- 2013 Deduction Limit = $500,000
Under the current law, bonus depreciation (which companies take on new equipment only) also ends Dec. 31. Companies can use bonus depreciation to deduct half the cost of new capital purchases in the first year.
Bonus depreciation can be more valuable than the Section 179 deduction, because the IRS limits the Section 179 deduction to business taxable income with any excess carried forward. However, if you’re actively involved in running a business, you claim losses generated by bonus depreciation against other income in 2013. Then, you can carry any still-unused losses back for two years and get a refund check from Uncle Sam.
To be eligible for these deductions, you must purchase equipment and put it into service before December 31. From assessing and upgrading IT infrastructure to upgrading outdated versions of Windows on company workstations (support for Windows XP ends in April, 2014), many firms are accelerating their purchases to take advantage of this year’s deduction.
It’s Not Too Late!
Don’t think that it’s too late to make purchases and put them into service. DynaSis’ Virtual CIOs and technicians are at the ready to help you decide which purchases are appropriate for your business and get them into service before the stroke of midnight on December 31. Call us to initiate fast-track project planning or to accelerate execution of your current plan.