Note: Running Fridays in FromGregsHead.com, is a continuing series of tips brought to you by Greg Price. These run Sunday evenings during the BusinessMaker’s Radio Show on KPRC 950AM. Audio files can be found on the PKF Texas – Entrepreneur’s Playbook® page of the PKF Texas website.
As the end of 2011 is drawing near, now is the time to utilize a tax planning ideas that can potentially save you and your business money, along with preparing you for upcoming changes in the tax laws. Many provisions in the “Health Care Acts” don’t begin until 2012. However, several changes were first mentioned in 2010, so a refresher on two of those items might be useful:
Bonus Depreciation – Qualifying property placed in service by taxpayers before Jan. 1, 1012 is eligible to be expensed immediately (100% of the property cost) in 2011. Qualifying property generally must have a depreciable life of 20 years or less (as defined by the Code) and be the original use of the property. In other words, buying used property doesn’t qualify for this particular benefit.
For assets placed in service during 2012 (before January 1, 2013), the rate of bonus depreciation is reduced down to 50%.
Increased Expensing Under Section 179 – Capital expenditures not qualifying for bonus depreciation could be expensed under Section 179. Under this section, most tangible personal property used in a trade or business can be expensed. For 2011, the maximum expense amount is $500,000. This benefit begins to phase out once expenditures exceed $2 million and is completely phased out at $2.5 million.
For 2012 expenditures, the maximum expensing amount is reduced to $125,000 and beneficial expensing begins to phase out at $500,000. For 2013, the maximum expense amount drops back down to $25,000 with the phase out beginning at the $200,000 expenditure level.
Unless Congress passes additional stimulus incentives, businesses might consider accelerating as many of their planned capital expenditures as possible into 2011 and certainly before 2013.
As always, start planning early, stay in touch with your accountant and stay informed. More in depth information about this and other tax topics can be found on our website.