March 23, 2015
On the first day of December, 2014, the Tax Increase Prevention Act of 2014 (TIPA 2014) was introduced into Congress by Dave Camp (R-MI); it was signed into law by the President on the 19th of December, making the tax breaks contained in the new law available for 2015 (FY 2014). A full summary of the law can be read here.
While most of the business tax breaks are not particularly useful to most small businesses, there are two exceptions, in particular, which stand out:
1. Section 179 Expensing. Businesses which made capital purchases in 2014 may deduct the full cost (up to a limit of $500,000) of depreciable assets which have a depreciable life of not more than 20 years. Examples of such assets include, but are not limited to, vehicles, office furniture and equipment, computers, mobile computing devices (e.g., iPads, smartphones, etc.), and other such depreciable assets. In the above-referenced summary of TIPA 2014, Section 179 expensing is called “the increased expensing allowance for business assets, computer software, and qualified real property (i.e., leasehold improvement, restaurant, and retail improvement property).”
2. Bonus Depreciation. In the TIPA 2014 summary linked above, this tax break is called “accelerated depreciation of certain business property” or “bonus depreciation.” Using bonus depreciation, a small business may deduct up to half of the cost of any new capital purchases in the first year following such purchases. Keep in mind, your business may not use Section 179 expensing and 50% bonus depreciation–it’s an either / or tax break. Nevertheless, depending on the amount of the investment, bonus depreciation may be the better option for the largest qualifying capital investments (i.e., those between $1 million and $2 million).
Other tax breaks extended under TIPA 2014 include, but are not limited to, the following:
- The tax credit for increasing research activities;
- The new markets tax credit;
- The tax credit for differential wage payments to employees who are active duty members of the Uniformed Services;
- The work opportunity tax credit;
- The expensing allowance for film and television production costs and costs of live theatrical productions;
- The subpart F income exemption for income derived in the active conduct of a banking, financing, or insurance business; and
- The 100% exclusion from gross income of gain from the sale of small business stock.
As always, both this author and Executive Legal Professionals, PLLC encourage you to seek the professional services of a CPA when preparing your tax returns, including your business tax returns. Having an accountant and a business attorney as part of the team protecting your business is absolutely essential, because the law and taxes touch on every aspect of your business. Don’t wait until you have an expensive legal crisis or until you are facing a tax audit. Be prepared to deal with law and taxes with preventive legal solutions from Executive Legal Professionals, and well-prepared financial records from a CPA you trust.
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