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Last-Minute Tax Deductions & Section 179 Caveat

  • 15 December 2015
  • Author: Cari Holbrook
  • Number of views: 2645
Last-Minute Tax Deductions & Section 179 Caveat

‘Tis the season for last-minute tax deductions. Technology purchases, staff appreciation, charitable giving, deferred income and accelerated expensing are five major ways to reduce your current year tax bill, making this the most wonderful time of the year indeed! However, one caveat remains: the Section 179 deduction, which allows a deduction on all or part of the cost of certain qualifying property in the year it is placed in service. The rule most commonly applies to certain equipment and vehicle purchases, but it can also apply to certain off-the-shelf software, property improvements, and other large purchases.

In past years, the IRS Section 179 tax deduction has been one of the most advantageous last-minute deductions for business owners to take. That’s because “tax extenders” have kept the deduction at a remarkably high $500,000 amount AND with 50 percent bonus depreciation.

This year, however, the Section 179 limit has been set at $25,000 with no bonus depreciation.  That’s a huge difference. Complicating matters, a simple last-minute extension—as we’ve seen in the past—is being contested by lawmakers who would rather see it changed or made permanent.

Farming and ranching groups are particularly vocal about this uncertainty but it also deeply affects business owners in retail, restaurant and many other industries. The bottom line: If you’ve made or would like to make property purchases of more than $25,000 in 2015, contact us.  We can help you navigate the options available to you.

**UPDATE (Dec. 17, 2015): A bill has been passed to retroactively increase and makes permanent the Section 179 expensing provision from $25,000 to $500,000. The phase out remains at $2,000,000. Following the 2016 tax year, both of these amounts are indexed for inflation. For more information, see our BANKLER REPORT or contact us.** 

Image Copyright: i9370 / 123RF Stock Photo

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