Hiring and buying: Other Year End Tax Planning Issues

If your company incurred a net operating loss in 2012, you may not be looking to add employees or buy assets. Then again, maybe things are picking up and the time is right for doing either or both.

When it comes to hiring, the federal government is offering a healthy tax break for bringing on board a particular kind of staff member: a qualified veteran. The VOW to Hire Heroes Act of 2011 extended a tax credit for making these hires through 2012. The act also doubled the maximum credit to $9,600 for hiring disabled vets who’ve been out of work for six months or more in the preceding year.

In addition, there’s now a credit of as much as $5,600 for hiring nondisabled veterans who’ve been unemployed for six months or more in the preceding year. Another credit, this one for up to $2,400, is available for hiring nondisabled vets who’ve been out of work for four weeks or more, but less than six months, in the preceding year.

If you’re in the market for equipment or other business assets, you have a key decision to make in choosing between the 50% bonus depreciation — currently available only until Dec. 31, 2012 — and the Section 179 expensing election.

That is, the Sec. 179 election may provide a greater benefit this year because it applies to both used and new property and may allow you to deduct 100% of an asset acquisition’s cost. Then again, bonus depreciation isn’t subject to any asset purchase limit or net income requirement, and Congress may increase it to 100%. Ask your tax advisor for the latest information and for help deciding which break is right for you this year — additional rules and limits apply.