DiSabatino CPA Blog

Mike DiSabatino CPA

2 minutes reading time (446 words)

Plan for Lower Section 179 Expense

Plan for Lower Section 179 Expense

Small Businesses: Plan for Lower Section 179 Expense
Top-line:
In 2014, the annual expense limit for Section 179 is now $25,000, down from $500,000 in 2013. You will need to plan accordingly.

Background

Section 179 of the tax code allows businesses to immediately expense qualified capital purchases versus depreciating (recovering) their cost over time. Qualified purchases can be new or used equipment and certain software placed in service during the year. This benefit can be maximized as long as total qualified asset purchases by your business do not exceed $200,000 (formerly $2 million) during your 2014 tax year.

What’s the Problem?

For years the threshold for qualified purchases was much higher than the lower Section 179 amount in 2014. The old Section 179 provision allowed for small businesses to upgrade equipment while lowering their current year tax obligation. Many small businesses like dentist offices, veterinarians, chiropractors and others used this provision in the tax code to help manage their cash flows through reduced taxes while purchasing needed equipment.

Time to Plan

Users of Section 179. If your business currently uses Section 179 as a tax planning strategy, you need to review your anticipated capital purchases for the year. Consider prioritizing your needs to ensure the most important capital purchases are at the top of your list.

Delay your Purchases? There is a slight possibility that Congress will act during the year to increase the Section 179 limits once again. This retroactive nature in Congress has been in place for the past number of years, so this is not out of the question. Consider delaying purchases until later in the year if you think this might happen.

Is Section 179 for you? Please remember that taking advantage of this provision in the tax code only changes the timing of expensing your capital purchases and not the over all deduction of your purchase. If you think Congress will continue to raise taxes to help balance the budget, your future income could be exposed to a higher tax rate. By using standard recovery periods for your capital purchases (typically three, five, or seven years), you are saving some expense for later (higher tax) years. In this case using Section 179 expensing may not be the right decision for your business.

 

Please give us a call to discuss these and other profit-boosting ideas for your business.

DiSabatino CPA
Michael DiSabatino
651 Via Alondra Suite 715
Camarillo, CA 93012
Phone: 805-389-7300
ww.sharpcpa.com

This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here.  All rights reserved.

1
DiSabatino CPA Receives 2014 Best of Camarillo Awa...
Indirect IRA Rollovers. Change is Coming

Related Posts

 

Speed Up Your Success!

Contact Us Today: 1-805-389-7300

© 2006-2018 Michael DiSabatino, CPA. All Rights Reserved.