Tax Incentive to Accelerate Fixed Asset Acquisitions By Year End

November 10, 2011

Unless there is a law change, business taxpayers have a limited window in which to take advantage of the enhanced Code Sec 179 expensing election. For 2011, the dollar limit is $500,000 and the investment limit is $2 million. The dollar limit for fiscal years beginning in 2012 is scheduled to fall to $139,000 and the investment limit is scheduled to fall to $560,000. The 100% bonus depreciation provisions will also expire for most types of assets placed in service after 2011, and be replaced by 50% bonus depreciation for assets placed in service in 2012. There are currently no bonus depreciation provisions for most assets placed in service after 2012.                                                            

Special expensing rules for qualified real property are scheduled to expire at the end of this year.  A taxpayer that places qualified leasehold improvement property, qualified restaurant property or qualified retail improvement property in service in a tax year that begins in 2010 or 2011 may elect to treat the property as Code Sec 179 property and expense up to $250,000 of the property cost. Code Sec. 179 expensing is also allowed for off-the-shelf computer software placed in service in tax years beginning before 2012, but not after.

Whether you are a small or large business, these changes argue strongly for purchasing qualifying equipment before the end of 2011 (before the end of the current fiscal year in the case of businesses with a year-end other than December 31).   

For more information please your Perelson Weiner partner.

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