Without action by Congress, the maximum amount a small business can write off for vehicles and other equipment will drop next year from the current $139,000 to a new amount of $25,000.
President Obama issued a statement Wednesday, July 11, urging Congress to not only extend current tax benefits for small businesses, but increase the write-off amount up to $250,000 for equipment purchased in 2013.
Current rules under Section 179 of the under the IRS Tax Code allow a business to write off up to $139,000 for equipment purchased and placed in service in 2012. A bonus depreciation kicks in for higher purchase amounts up to $560,000.
Tax incentives for equipment purchases under Section 179 date back to 2001 as part of the initial “Bush tax cuts” signed into law by President George W. Bush. Since that time, Congress has passed a handful of bills that have extended the tax cuts and modified the amounts that businesses can write off.
Without Congress acting again to extend the provisions beyond Dec. 31 of this year, the maximum write-off for equipment purchases will drop to $25,000.
How does this relate to trucking?
According to the information site, section179.org, a small business in a 35 percent tax bracket that purchases up to $139,000 worth of equipment currently sees a tax benefit of $48,650. Amounts ranging from $139,001 to $560,000 qualify for the benefit plus bonus depreciation.
Action or inaction by Congress before the end of the year would change the amounts.
Under current rules, equipment does not have to be purchased outright to qualify for the tax benefit, according to the information site. Financed equipment placed in service prior to Dec. 31 also qualifies. Used equipment qualifies for the deduction if it is “new to you.” However, the bonus depreciation offered for new equipment purchases does not apply to used equipment.