Are you missing out on a potential 2012 tax credit? Don’t leave money on the table

Posted on September 10, 2012 in Blog ,Improve Financial Management by

Businesses have significant reasons to acquire and install capital equipment and software before the end of 2012 thanks to the Tax Relief Act of 2010 and the Small Business Jobs Act. Also, because the allowable Section 179 deduction is expected to be reduced to $25,000 in 2013, it’s important to plan now to maximize these benefits in 2012.

Highlights for tax benefits: 
  • The allowable Section 179 deduction has been extended to $125,000 on the cost of new and used equipment purchased and may be adjusted for the Cost of Living Adjustment (COLA).
  • Allows a 50% bonus depreciation of the cost of new equipment for a limited time and under certain conditions.
Section 179 Deduction
For 2012, companies can expense up to $125,000 (+COLA) as a deduction as long as total purchases do not exceed $500,000 (+COLA)
  • Applies to new and used equipment
  • Can be combined with bonus depreciation
  • The maximum amount dollar for dollar phase-out threshold for 2012 is $500,000 (+COLA)
  • Equipment acquisitions totaling $625,000 or more do not result in any Section 179 deduction
  • $1 buyout leases and EFA’s typically qualify for Section 179 benefits, while FMV’s do not
Bonus Depreciation
The enhanced bonus depreciation benefit extends the amount of immediate write-off to 50% for capital expenditures and depreciable property (i.e. manufacturing equipment, computers, software, etc.).
  • Applies to new equipment only that is placed in use in the United States in the 2012 calendar year. 
  • Equipment must be depreciated under the Modified Accelerated Cost Recovery System (MACRS) and have a depreciation recovery period of 20 years or less. 
Section 179 Deduction and Bonus Depreciation Example
Courtesy of Joe Glose Fernwood Capital 1-888-241-8636

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