There are many aspects to year-end planning; one of them for businesses is your ability to make choices when it comes to depreciation. Equipment and machinery purchases can be a big part of a business’s budget, and they can make a big difference when it comes to taxable income.
A piece of equipment that is placed into service before the end of the year will have depreciation expense for the year. In 2013, new machinery and equipment is eligible for 50% bonus depreciation, meaning 50% can be taken in the very first year. The bonus depreciation rules are scheduled to lapse, meaning 2013 is the last time this special depreciation perk will be available.
Section 179 is the other big depreciation perk and that allows you to claim up to $500,000 of depreciation on new or used equipment placed in service by the end of the year. In 2014, the Section 179 limitation is scheduled to go back to $139,000, so again 2013 is the last time the expanded Section 179 is going to be around. It’s possible they will extend either the bonus depreciation or expanded Section 179, but at this point it doesn’t appear to be likely.
Using depreciation methods to adjust your business’s taxable income is one of the easiest things to do. If your taxable income is right where you want it, maybe you defer the purchase of equipment into next year or you elect not to claim any Section 179. Conversely, if your taxable income is high and you want to avoid the new higher tax rates, claiming bonus depreciation and Section 179 can greatly reduce your taxable income.
Recent Comments