Several very favorable business tax provisions may dictate taking action between now and year-end. As this was written, these breaks had expired. However, Congress will likely extend them through this year. That could happen relatively late in the year, and you may have to move quickly to take advantage.
- Larger Section IRC 179 Deduction. Under the Section 179 deduction privilege, an eligible business can often claim first-year depreciation write-offs for the entire cost of new and used equipment and software additions and eligible real property costs. For tax years beginning in 2015, the maximum Section 179 deduction is currently only $25,000. However, Congress will likely increase the maximum allowance for tax years beginning in 2015 to $500,000 (same as for 2010–2014).
Note: You cannot claim a Section 179 write-off that would create or increase an overall tax loss from your business. Please contact us if you think this might be an issue for your company.
- Section 179 Deduction for Real Estate Expenditures. Real property improvement costs are generally ineligible for the Section 179 deduction privilege. However, a temporary exception applied to tax years beginning in 2010–2014. The exception expired at the end of 2014, but we expect it to be extended to cover qualifying real estate expenditures placed in service in tax years beginning in 2015. If that happens, your business could immediately deduct up to $250,000 of qualified costs for restaurant buildings and improvements to interiors of retail and leased nonresidential buildings.
Note: Once again, you can’t claim a Section 179 write-off that would create or increase an overall business tax loss.
- 50% First-year Bonus Depreciation. Above and beyond the Section 179 deduction, your business can also claim first-year bonus depreciation equal to 50% of the cost of most new (not used) equipment and software placed in service by December 31 of this year—assuming the 50% bonus deprecation break is extended to cover qualifying assets placed in service in calendar-year 2015. We expect that to happen, but it could be late in the year. If so, be prepared to act quickly in order to take advantage.
Note: 50% bonus depreciation deductions can create or increase a Net Operating Loss (NOL) for your business’s 2015 tax year. You can then carry back the NOL to 2013 and/or 2014 and collect a refund of taxes paid in one or both those years. Please contact us for details on the interaction between asset additions and NOLs.