It’s come and gone, only to return again. Bonus depreciation, first enacted by the Bush administration after September 11, 2001, is aimed at spurring capital spending by U.S. companies. Extended by the Obama administration as part of the American Taxpayer Relief Act of 2012 (ATRA), passed in 2013, bonus depreciation continues to provide companies significant tax breaks on qualifying assets, from furniture/fixtures to vehicles to machinery/equipment and beyond.
Considering capital expenditures in 2013? With the future of bonus depreciation rules unclear, if you’re contemplating any capital expenditures in the coming months, 2013 may be the right time to act.
2013 Section 179 Depreciation Rules:
- Maximum amount is $500,000, beginning to phase-out dollar for dollar for purchases of qualified property totaling more than $2 million.
- Taxpayer must have taxable income to claim. Cannot create a loss when claiming Section 179.
- Section 179 applies to new or used purchases.
2013 Section 168 (k) (or Bonus) Depreciation Rules
- A 50% Bonus Depreciation extended through the end of the year.
- The qualifying asset must be placed in service by 12/31/13.
- Original use of the asset must commence with the taxpayer.
- Qualifying assets must have a tax depreciable life of 20 years or less.
These rules apply for federal tax purposes. States vary in their treatment of bonus depreciation and Section 179 expense, but no states are more generous than Federal tax rules.
Contributed by Scott Myers, CPA, CSEP
Scott Myers is a Manager in RKL’s Tax Services Group. His area of emphasis is providing tax planning strategies and compliance solutions for closely-held businesses in a wide variety of industries and as well as individuals. Scott also focuses on estate and trust planning for individuals and their families.