New Machinery Tax Incentives for Manufacturing Companies

Section 179 PASSED. $500,000 Deduction time running out.) 

Increased Expensing Passes/Made Permanent The Senate has now done its part and passed a year end budget deal that funds the U.S. government through September 2016, avoiding a shut down. This was combined with a package of tax breaks providing much needed tax benefits to a broad spectrum of small businesses. The bill now heads to the President for his signature, which the White House indicates he will sign. 

The legislation extends more than 50 expiring tax cuts, with more than 20 becoming permanent, including increasing the maximum amount for small business expensing under IRS section 179 to $500,000. This would be reduced if the cost of section 179 property placed in service exceeds $2 Million.

The new permanent Section 179 expensing limit allows a business to take a current year deduction of the full purchase amount up to $500,000 for assets under $2 Million. 

The new permanent Section 179 expensing limit allows a business to take a current year deduction of the full purchase amount up to $500,000 for assets under $2 Million.

Example Savings*

Original Equipment Cost: $500,000

New Potential Tax Savings: $175,000

Final Equipment Cost: $325,000

Cash Savings on

Equipment Purchase: $175,000

*Assuming a 35% tax qualifying purchase

This information does not constitute tax advice, please check with your tax advisor on how this applies to your business.

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$25,000 WRITE-OFF ($1 and $101 buyout leases qualify!) 

For 2014 the Federal Section 179 deduction has been restored to its 2001 limit of $25,000 plus an adjustment for inflation. These limits may be adjusted by changes to federal law. Section 179 Federal Income Tax Deduction: This deduction allows a company to deduct the first $25,000 of equipment (Section 179 Property) purchased in 2014 from their taxable income. For companies purchasing (or leasing with a $1 or $101 buyout) up to $200,000 of equipment, this deduction is available in full. It then phases out on a dollar for dollar basis for amounts over $200,000. 

STANDARD DEPRECIATION

In addition to the $25,000 write-off, companies may be eligible to deduct federal depreciation on the adjusted basis of their qualified equipment, state depreciation, local tax incentives and interest expenses. Equipment must be purchased and placed into service on or before December 31, 2014. Always check with your accountant or financial adviser to verify tax or accounting issues and any tax benefits. Tax laws are subject to change at any time and their application is highly dependent upon the unique facts and circumstances of any particular taxpayer. The information on this page is offered as general guidance and is not intended as specific legal, tax or accounting advice. These calculations are only estimates and everyone’s tax situation is different. 

SGovernment Affairs Update: 

December 22, 2014, 10:00 am 

RE: On Friday, December 19, 2014, the President signed into law H.R. 5771

Per the White House Press Secretary:

 "On Friday, December 19, 2014, the President signed into law: H.R. 5771, which temporarily extends several expired tax provisions related to individuals, business, and energy through December 31, 2014; and exempts from taxation Achieving a Better Life Experience (ABLE) accounts set up for the benefit of persons with disabilities to assist in maintaining health, independence, and quality of life."

What this means:

As previously reported this law retroactively expands Section 179 deduction limits through 12/31/2014.

This new law reinstates the limit on Section 179 to $500,000 as well as reinstates 50% Bonus Depreciation.

Effective January 1, 2015 the Section 179 limit reverts back to $25,000 and will remain there unless Congress acts AGAIN!