Saturday, September 23, 2023

Washington, D.C. — Congress recently renewed several business tax benefits, including 50 percent bonus depreciation with expensing levels at $500,000 (with a $2.5 million ceiling) through Section 179. The bill, H.R. 5771, had been approved by the House but toiled around the Senate before passing the same day that Congress left for its holiday break.

While it does give businesses a bonus, it doesn’t give them much time to take advantage of it (just 8 days until the end of the year). When the clock strikes midnight on January 1, bonus depreciation disappears and expensing levels return to just $25,000 with a ceiling of $200,000. This also applies to any equipment you leased or purchased and put into service in 2014.

That means that if you purchased qualifying equipment (see your tax expert for qualifying vehicle purchases and special limits on deductions), you can deduct the full cost of the investment in the year you purchased it rather than taking the deduction over a number of years—up to the $2.5 million ceiling. For select small and midsize operators, that could reduce your tax obligation to nothing for the fourth quarter of 2014. Some of the deductible items include office furniture, computers, off-the-shelf software for computers, business office equipment (copy machines, garage machinery), and business vehicles over 6,000 pounds GVWR. Used equipment does not qualify for bonus depreciation.

Work Opportunity Tax Credit (WOTC) is also getting a small window of life, so if you’re on the fence about hiring a candidate before the end of the year, it might be worth it to go ahead and extend the offer. The credit is worth up to $9,600 per qualified hire, including unemployed veterans, recipients on welfare or food stamps, or ex-felons. Of course you don’t want to rush the hiring process just to get a credit, but it could be worth it if you’ve already been interviewing and need a tie-breaker between two great candidates.

Remember, these deductions are only valid through the end of the year. WOTC and bonus depreciation go away completely, while Section 179 is significantly reduced.

Visit irs.gov or talk to your accountant for more information on the deductions.