Businesses have significant reasons to acquire and install capital equipment before the end of 2013, thanks to the American Taxpayer Relief Act of 2012. And, because the allowable Section 179 deduction is expected to be reduced to $25,000 in 2014 and Bonus Depreciation is scheduled to expire, it’s important to plan now to maximize these benefits in 2013.
Key highlights for tax benefits:
- The allowable Section 179 deduction has been increased to $500,000 on the cost of new and used equipment purchased through 12/31/2013
- Allows a 50% bonus depreciation of the cost of new equipment [under certain conditions] through 12/31/2013
Section 179 deduction
- For 2013, companies can expense up to $500,000 as a deduction as long as total purchases do not exceed $2.5 million.
- Applies to new and used equipment
- Can be combined with bonus depreciation
- The maximum qualified equipment investment amount eligible for the full $500,000 deduction in 2013 is $2 million
- Beyond the $2 million maximum equipment investment threshold, there is a dollar for dollar phase-out of the Section 179 Deduction
- Equipment acquisitions exceeding $2.5 million are not eligible for any Section 179 deduction
- Don’t miss out on 2013 equipment tax benefits
| Cost of equipment | $225,000.00 |
|
1st year write-offs • Section 179 |
$225,000.00 |
| • 50% Bonus depreciation | $0.00 |
| • Normal 1st year depreciation* | $0.00 |
| Total 1st year deduction | $225,000.00 |
| Potential tax savings in 2013** | $78,750.00 |
|
Equipment cost after tax savings year one |
$146,250.00 |
Section 179 deduction and bonus depreciation in action:
*Based on an expected 5 year asset life
**Tax savings assume a 35% tax rate
Bonus Depreciation
The enhanced bonus depreciation benefit allows an additional immediate write-off of 50% of the undepreciated balance for capital expenditures and depreciable property (new equipment only.).
- Applies to new equipment only that is placed in use in the United States in the 2013 calendar year
- Equipment must be depreciable under the Modified Accelerated Cost Recovery System (MACRS) and have a depreciation recovery period of 20 years or less
- The Bonus depreciation benefit is scheduled to expire on 12/31/2013
Don’t delay - speak to your tax and accounting advisors today to maximize these and other incentives this year.