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Dec 16

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Accelerate equipment purchases to preserve an important 2013 tax break

The first-year bonus depreciation law which allows rapid write-off of equipment purchases is expiring at the end of 2013. Companies who can do so are well advised to accelerate their equipment and software purchase(s) before the end of 2013.

Combined, the two laws allow 60% of equipment to be written off in the first year. The expiring provision involves 50% bonus depreciation. In addition, 20% of the remaining 50% balance (or another 10% of the purchase cost) can be written off. The 20% depreciation for 5-year equipment remains for 2014, leaving the “missed” 40% write-off to be spread out over future years instead of being taken immediately. The 50% bonus depreciation is not limited based on the size of the company involved.

IRC Section 179 is another important expiring provision. Unlike the items discussed in the preceding paragraph, this tax write-off is only of benefit to small companies, since the write-off is eliminated or reduced dramatically once capital expenditures exceed $2 million per year. In 2013, the maximum write-off is $500,000, but this will decrease to $25,000 in 2014.

This article describes the expiring tax breaks in greater detail.

Of course, Congress can extend any of these write-offs. However, they have not done so yet, and do not appear able/willing to do so.

 

About the author

David Nolte

I am a founding principal of Fulcrum Inquiry, an accounting and economic consulting firm that performs damage analysis for commercial litigation, forensic accountings, financial investigations, and business valuations. I am a Certified Public Accountant (CPA) and an Accredited Senior Appraiser (ASA), as well as having other professional credentials. I regularly serve as an expert witness involving damages measurement. My litigation-oriented resume is on Fulcrum's website.

Permanent link to this article: http://betweenthenumbers.net/2013/12/accelerate-equipment-purchases-to-preserve-an-important-2013-tax-break/

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