BREAKING NEWS: Higher Benefits from Section 179 have been approved! You have until December 31st to take advantage! Keep reading.
IRS Section 179: this major bill will stimulate IT purchases before the end of this year for profitable businesses. This will give these businesses the ability to purchase equipment such as servers, PCs, laptops, etc. to offset profits instead of paying tax on them. The limit was $25,000, but this bill will extend it to $500,000 and if you are on a calendar fiscal, you will only have until the end of the year to spend it. So that means you have only 10 days! The 2015 Section 179 Deduction threshold for total amount of equipment that can be purchased is now $2,000,000. Most new and used equipment, as well as some software, qualify for the Section 179 Deduction. 50% bonus depreciation has been reinstated for the tax year 2015 and extended through 2019. You can deduct an additional 50% of the amount over $500,000 in addition to your standard depreciation deduction. This applies to equipment acquired and put into service during 2015, 2016 and 2017. Then bonus depreciation will phase down to 40% in 2018 and 30% in 2019.
The U.S. Senate on Friday passed a $622 billion Tax Extender Bill extending several expiring tax breaks and making tax policy changes. President Obama signed the PATH Act(Protecting Americans from Tax Hikes) almost immediately after it reached his desk. The PATH Act makes more than 20 tax breaks permanent in addition to retroactively extending a slew of others for two or more years, some with significant modifications.
There are other ways this bill affects businesses. Here are some highlights of the key business provisions in the new measure:
- Section 179 expensing. The PATH ACT permanently restores the generous maximum expensing deduction of $500,000 for qualified business property with a phaseout threshold of $2 million. (It was scheduled to drop to $25,000 with a $200,000 phaseout threshold.) It will be indexed for inflation for 2016 and thereafter.
- Bonus depreciation. 50% bonus depreciation for qualified business property is retroactively extended to 2015, then reduced to 40% for 2018, and then 30% for 2019. Bonus depreciation will completely expire after 2019 unless it is extended again.
- 15-year cost recovery. Taxpayers can. The credit for research and development expenses is made permanent with certain modifications. Notably, the alternative simplified credit is increased from 14% to 20%, while small businesses may be able to offset alternative minimum tax (AMT) liability and start-ups can offset payroll taxes, beginning in 2016.
- Research and development credit. The credit for research and development expenses is made permanent with modifications including the alternative simplified credit being increased from 14% to 20%, while small businesses may be able to offset alternative minimum tax (AMT) liability and start-ups can offset payroll taxes, beginning in 2016.
- S Corporation changes. Makes permanent the five-year recognition period for built-in-gain (BIG) gain following a conversion to S corporation status and extends the basis adjustment in stock when an S corporation makes charitable donations of property.
- Qualified small business stock (QSBS). The 100% tax exclusion for investors in QSBS, which was scheduled to be reduced to 50% for QSBS acquired after 2014, is retroactively extended and made permanent. This tax break requires a five-year holding period.
- Work Opportunity Tax Credit (WOTC). This credit is available for hiring workers from targeted economic groups and military veterans, is extended, with minor modifications, through 2019.
- New markets tax credit. The PATH Act authorizes allocation of $3.5 billion of new markets credits retroactive to 2015 and through 2019.
If you have any questions about this bill, there is a lot of information being released from various outlets. We encourage you to speak with your Accountant or Financial Advisor if you have questions regarding this tax bill and how it affects your business. If you have IT needs, contact 2W Tech today and we can help discuss what options would best fit your business. Don’t delay or you will miss the December 31st deadline.
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