For the last two years, small businesses were able to get 100 percent bonus depreciation on new equipment they had leased or bought. Unfortunately, the good times aren’t going to keep rolling.
As of December 31, 2011, the two years of bonus depreciation are screeching to a halt alongside Section 179 tax benefits, which we covered recently. Now the best you can reasonably expect, barring a miraculous extension from a Congress that can barely pull its up pants up in the morning, is about 50 percent. Let’s look more at bonus depreciation and Section 179, shall we?
What That Means
While it’s not a complete disaster—I bet you’ll still take that 50 percent, since it’s still tax relief—but it’s likely to keep decreasing after 2012. That means if you’ve been thinking about equipment and you want the depreciation, now would be an ideal time to get moving on it.
But let’s back up a second. If you’re not familiar with bonus depreciation, here’s the long and short of it. It can only be used on new equipment, it offers tax relief on capital equipment costs of up to $2 million and it tends to be follow a Section 179 deduction in cases where a business is eligible for both. With 50 percent bonus depreciation, you will be eligible to deduct about half the cost of the equipment.
The upshot is that you can still deduct, albeit only half of what you could up until now. If you can sneak a deal in under the wire and get the full bonus depreciation, you should go for it.
Going For It
If you’re ready to upgrade or replace equipment and you’ve been putting it off, strike while the iron is still warm. Get your hands on the financing you need to get that that new machine and get a measure of tax relief, too.
If I may indulge in a shameless plug, Direct Capital offers up financing programs that will help you get the equipment you need and leave you eligible for bonus depreciation. That’s a good thing.
If you’d like to learn more, visit our website. Whether you do or not, feel free to leave your thoughts on bonus depreciation in the comments.