The American Taxpayer Relief Act of 2012 (ATRA) gave business owners a question to consider. If you’re in the market for business assets such as equipment and software, should you buy this year or next?
That’s because it extended through 2013 the higher Section 179 expensing limit of $500,000. This election allows you to deduct (rather than depreciate over a number of years) the cost of purchasing such new and used assets as equipment, furniture and off-the-shelf computer software. The break begins to phase out dollar-for-dollar when total asset acquisitions for the tax year exceed $2 million.
You can claim the Sec. 179 election only to offset net income, not to reduce it below zero to create a net operating loss. If your asset purchases for the year will exceed the phaseout threshold or your net income, consider 50% bonus depreciation. Also extended under ATRA, this tax break represents a first-year 50% depreciation allowance for qualifying, newly purchased assets acquired and placed in service in 2013 and even 2014 for certain long-lived and transportation property.