As we near the end of the year, time is running out on taking advantage of some of the best tax breaks incorporated into The Small Business Jobs & Credit Act of 2010.
As we’ve covered previously, the Act increases the Tax Code Section 179 deduction for qualified equipment,
enabling small businesses to write off up to $500,000 in equipment in the 2010 and 2011 tax years. But to get the best benefit – a 100% bonus depreciation deduction – you’ll need to have the equipment placed in service by Jan. 1, 2012.
IT Equipment Tax Benefits Through 2011 and 2012
As David White, Carousel Industries’ National Director of Capital Services, said in a previous post:
“This legislation provides an exciting opportunity for businesses to make important investments in IT and other business equipment and write off up to $500,000 in qualified equipment within the 2010 and 2011 fiscal years. Additionally, it gives business owners additional tax deduction and depreciation opportunities through December 31, 2012.”
The 100% bonus depreciation deduction, which comes on top of the normal accelerated depreciation for equipment, applies to equipment acquired and placed in service after Sept. 8, 2010 and before Jan. 1, 2012. So you’ll want to check your records to find out what equipment you bought and put in service this year or late last year. And if you’ve got equipment that you bought but have not yet put in service – get on it!
The “additional tax deduction and depreciation opportunities” that White referred to include a 50% first-year additional bonus depreciation for equipment placed in service after Dec. 31, 2011 and through Dec. 31, 2012 – so you’ve got that to look forward to.
More than IT Equipment qualifies for tax benefits
It’s not just IT equipment that qualifies for the tax breaks. The list includes:
• Equipment including machines purchased for business use.
• Tangible personal property used in business.
• Business vehicles with a gross vehicle weight in excess of 6,000 lbs.
• Computers and off-the-shelf computer software.
• Property attached to the business building that is not a structural component of the building.
Additional tax break considerations
As is typically the case when it comes to the tax code, there are other considerations you need to be aware of, namely:
The deduction begins to phase-out dollar for dollar after $2 million of qualified equipment is purchased during the year. Equipment acquisitions totaling $2.5 million or more do not result in any Section 179 deduction.
$1 buyout leases and EFAs qualify for Section 179 benefits.
These are some substantial tax breaks that can help companies invest in new equipment. If you’ve been delaying purchases during the recession, it may be worth making a move before year end to ensure these tax breaks make new equipment more affordable.
For more details, visit www.irs.gov or feel free to contact David White, our National Director of Credit Services directly at 678.892.3728 or via email at dwhite@carouselindustires.com.
