Last chance to take advantage of Section 179

Tax incentives that allow for generous savings on the purchase of new and used equipment will end January 1, 2013. 

Capitol Hill
Source: http://www.geoglance.com/photos/DC/1/capitol-hill

As the year comes to an end, so does the ability to take advantage of the increased tax credit offered by Section 179. The stimulus acts have greatly expanded the limits of the Section 179 deduction and have also added a one-time “Bonus Depreciation” on equipment that exceeds the deduction limit.

According to Section179.org, this deduction was intended to boost spending among small and medium sized businesses; it allows a company to deduct a significant portion of the purchase price of equipment bought in 2012 as opposed to just normal depreciation over several years. In addition to the tax credit, new equipment purchases also qualify for a bonus depreciation.

Once January 1 rolls around, the deduction amount is drastically decreased from $139,000 to $25,000 for 2013. Additionally, 2012 is the last year to take advantage of the bonus depreciation making the end of 2012 the perfect time to buy equipment.

Breakdown of purchasing an Apache in 2012 versus 2013. 

In accordance with Section179.org, a few rules go along with the Section 179 deduction and bonus depreciation. To utilize the $139,000 tax deduction, the company must purchase, finance or lease less than $560,000 in new and used equipment during the 2012 tax year. If the company purchases more than $560,000 in equipment, the deduction is decreased dollar for dollar for any amount over $560,000.

Beyond this, companies that purchase new equipment qualify for the added bonus depreciation which allows an additional 50 percent depreciation deduction on new equipment.

To calculate the total deduction, the Section 179 deduction is taken before the bonus depreciation. Amounts not deducted by Section 179 or the bonus depreciation can be depreciated using normal depreciation.
The exception to this rule applies to businesses without a taxable profit for 2012. In this case, Section 179 does not apply, and the business is allowed to carry the loss forward while still deducting some of the cost of new equipment. The rules that apply to the Section 179 deduction can be found at Section179.org.

This is the time to jump on the Apache Early Buy Incentive Program and save on a 2013 Apache.