In these challenging economic times, it is important to make use of every tool available to cut costs and improve after-tax profits. You may have the ability to deduct 100% of your investment in IT, meaning hardware and software purchases made by December 31, 2011.
Section 179 of the Business Tax Provision of “Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010” extended the Bonus Depreciation.
Bonus Depreciation – the additional first year depreciation deduction that has been allowed for investment in “qualified property” for 2008 through 2010 is extended through 2012.
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Available for qualified property acquired and placed in service on or after January 1, 2008 and before January 1, 2013.
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Qualified property acquired and placed in service after September 8, 2010, and prior to January 1, 2012, is eligible for a 100 percent first-year depreciation deduction.
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Qualified property that does not satisfy the acquisition and placed-in-service rule immediately above is eligible for 50 percent first-year depreciation deduction.
Qualified property – property is required to be new:
1. Tangible property to which MACRS applies that has an applicable recovery period of 20 years or less
2. water utility property
3. Most types of computer software as defined under § 167(f) (1) (except software that is considered an amortizable section 197 intangible); and
4. Qualified leasehold improvement property
Here is what is allowed:
Section 179 Expense – a taxpayer may elect to treat the cost of any section 179 property as an expense which is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which the section 179 property is placed in service.
Property may be expensed under Code Sec. 179 whether bought new or used. By contrast, property is eligible for the new 100% first-year write-off only if it is new.
Dollar Limitation: the aggregate cost which may be taken into account for any taxable year shall not exceed –
$250,000 in the case of taxable years beginning after 2007 and before 2010,
$500,000 in the case of taxable years beginning in 2010 or 2011, and
$125,000 in the case of taxable years beginning in 2012
$25,000 in the case of taxable years beginning after 2012
Reduction in Limitation: the limitation for any taxable year shall be reduced (but not below zero) by the amount by which the cost of Sec. 179 property placed in service during such taxable year exceeds –
$2,000,000 in the case of taxable years beginning in 2010 or 2011,
$500,000 in the case of taxable years beginning in 2012, and
$200,000 in the case of taxable years beginning after 2012
We highly recommend you check with your financial officer and or accountant to determine if this is right for your business. It does not appear, at this time, that the U.S. Congress will extend or create a new similar incentive.
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NOTICE
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY VALOGIX TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.