Cash flow is one of the most important things to consider in the world of business. Imagine buying that new lift that you need for your body shop and being able to write it off immediately. You can do this if you act fast and put your qualified capital expenditures into service by year-end. The best depreciation incentives that we have ever experienced are set to expire by year-end. These incentives are summarized as followed:
- A 100% bonus depreciation deduction allowed for qualified investments made after September 8, 2010 and before January 1, 2012
- The Section 179 (expensing of capital assets) limit increased to $500,000 for the tax years 2010 and 2011. For qualified expenditures in excess of $2,000,000, the benefit begins to phase-out on a dollar for dollar basis.
If you miss out by year-end, there is always the consolation prize, which is that 2012 incentives include the following:
- A 50% bonus depreciation deduction allowed for assets placed into service after December 31, 2007 and before January 1, 2013.
- The Section 179 (expensing of capital assets) limit increased to $125,000 for the tax year 2012. For qualified expenditures in excess of $500,000, the benefit begins to phase-out on a dollar for dollar basis.
Capital expenditures can be a very beneficial tax planning tool. Consider what needs to be replaced in your auto dealership and whether it is to your advantage to act now. Also, keep in mind that Congress can always rule in favor of changing future tax incentives. This includes extending the 100% or eliminating the 50% bonus depreciation for the tax year 2012. You can always assume that there will be taxes; however, the means of determining them changes often.
If you have any questions regarding to these depreciation incentives, please contact Steven Barber at firstname.lastname@example.org.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.