Big depreciation breaks for small businesses
The American Taxpayer Relief Act (ATRA) has extended, through 2013, the enhanced Code Sec. 179 small business expensing. The Code Sec. 179 dollar limit for tax years 2012 and 2013 is $500,000 with a $2 million investment limit. The rule allowing off-the-shelf computer software has also been extended. Currently, for years after 2013, the limitations are set to revert back to $25,000 with a $200,000 investment limit.
The American Taxpayer Relief Act also extends the ability for companies to elect 50 percent bonus depreciation through 2013. Some transportation and longer period production property is eligible for 50 percent bonus depreciation through 2014. To be eligible for bonus depreciation, qualified property must be depreciable under the Modified Accelerated Cost Recovery System (MACRS) and have a recover period of 20 years or less. These requirements encompass a wide variety of assets. However, the property must be new and placed into service prior to January 1, 2014. (January 1, 2015 for certain transportation and longer period production property).
Subject to the investment limitations, Sec 179 expensing remains a viable alternative specifically for small businesses. Property qualifying under Sec 179 expensing may be used or new, in contrast to bonus depreciation’s “first-use” requirement.
If you have questions regarding property that you have purchased or are thinking of purchasing, and have questions regarding qualifications, please contact us.