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Business Deductions Passed as a Result of the Fiscal Cliff

Posted in Operating a Business, Tax

While the new tax law was aimed at averting the “fiscal cliff,” it contained some provisions which benefitted American business. As I see it, here they are:

  • Section 179 Deductions – in 2012, Section 179 (first year expensing) provided businesses with a write off of up to $139,000 on new, or used, newly acquired equipment. That limit was reduced dollar for dollar for equipment purchases over $560,000. The new law permits up to $500,000 in first year expense and doesn’t begin the phase out until $2 Million has been purchased. This is retroactive for 2012. Unfortunately, this provision expires and cuts the deduction to $25,000, with a phaseout starting at $200,000, in 2014. Congress has consistently extended this provision and is likely to do so again to keep the economy going.
  • Bonus Depreciation – the new tax law allows the current 50% bonus, or first year, depreciation to continue through 2013, with the balance amortized and deducted over the useful life of the equipment. This allowance only applies to new equipment purchased.
  • New Deadlines for Old Items – several items had their tax lives extended through 2013. These include: qualified R&D credits, new markets tax credits, some investments in low income communities and the work opportunity tax credit. Under the latter, businesses can get credits for 40% of the first-year wages of a qualified individual hired, up to $6,000, and for some hires, such as certain veterans, the credit may be as ghigh as $9,600.

If you are contemplating certain business decisions relating to acquiring either a business or expanding a current business, careful thought ought to be given to the new law and its benefits and consequences. If you need help sorting all this out, please feel free to contact any of our business attorneys at Schober Schober & Mitchell, S.C. at 262-785-1820 or 262-569-8300, see us on the web at www.schoberlaw.com or email me at tgs@schoberlaw.com  .