Two tax deductions related to the purchase of equipment will expire on December 31, 2013. If you expect to purchase business equipment in the near future, you should consider making the acquisition prior to December 31.
First year bonus depreciation provisions permit the immediate deduction of 50% of the cost of new equipment purchased, with no limits. For example, a $2 million equipment purchase will result in an immediate $1 million tax deduction, with the balance subject to normal tax depreciation rules.
The Section 179 deduction generally permits a dollar for dollar write off for their equipment purchases, subject to a $500,000 limit for 2013. Absent action by Congress, this limit will drop to $25,000 for 2014.
To qualify for first year bonus depreciation or Section 179 expensing, the equipment must be placed in service. Equipment ordered, but not placed in service on or before December 31 will not qualify for either deduction.
If your company does business in New Jersey, it is important to note that New Jersey does not recognize or permit any first year bonus depreciation, and limits the Section 179 deduction to $25,000 per year. Compliance with these rules requires maintenance of separate New Jersey depreciation schedules for equipment for which Federal bonus depreciation or Section 179 expense in excess of $25,000 was taken.
The timing of equipment purchases should be part of your overall tax plan. Regardless of these expiring provisions, tax and operating projections should be reviewed to determine the benefit of equipment purchases this year or in future years. For example, if your company has taxable losses for 2013, or is a pass through entity with basis issues, it may be beneficial to wait until after December 31 to make the equipment acquisitions.
If you have any questions, please contact us. Comments are welcomed.
No comments:
Post a Comment