An Expanded Deduction for Businesses

Just days before Christmas 2015, Congress left a big gift under the tree that trucking companies and other businesses can use to save on their taxes for 2016.

Section 179 of the federal tax code allows companies to deduct money spent on equipment from their taxes. Congress’ “Protecting Americans from Tax Hikes” (PATH) Act, which President Obama signed into law on Dec. 21, 2015, permanently increased the annual cap on that deduction from $25,000 to $500,000.

That increase means that 100% of the money a company spends on a wide range of different equipment during a single year is tax-deductible up to $500,000. The expanded deduction is permanent and retroactive, meaning companies can write off up to $500,000 in expenses on purchased or leased equipment on their 2015 taxes.

Bonus Depreciation Extended

In other good news for businesses, the PATH Act also extended the 50% bonus depreciation through 2019. Companies of all sizes will be able to depreciate 50% of the cost of equipment acquired and used during 2016 and 2017. The bonus depreciation will be phased down to 40% in 2018 and 30% in 2019.

All companies can benefit from the expansion of Section 179. However, the $500,000 cap is especially valuable for small and start-up companies that need to acquire more assets. Equipment that qualifies for the Section 179 deduction includes machines purchased for business use, air conditioning and heating units, vehicles that weigh more than 6,000 lbs., computers, software, office equipment and office furniture.

To learn more about Section 179 and the rest of the PATH Act, vision www.section179.org.

Sources: Forbes, www.section179.org, CPAPracticeAdvisor.com