In July 2015, the Senate Finance Committee voted 23 to 3 to extend bonus depreciation and the enhanced section 179 deduction through 2016. The full Senate has not indicated if or when it will act on this legislation and the House is not scheduled to take up extenders until the fall. Most practitioners expect it to be reinstated, but time will tell. How should you prepare?
What is the Section 179 and bonus depreciation deduction?
As a refresher, the Section 179 deduction applies to the purchase of new and used property, while bonus depreciation is only applicable to new purchases. Furthermore, a business must carry-forward a Section 179 deduction in excess of a net operating loss, whereas bonus depreciation may still be deducted in the current year. Thus, the Section 179 deduction is limited by the amount of business income of the entity. Any amount in excess that could not be claimed because of the income limit would be carried forward to future years.
What are the Section 179 and bonus depreciation 2015 limits?
The current Section 179 deduction limit is $25,000, but it may be reinstated to $500,000. The bonus depreciation provision is not currently in place, but may be reinstated to 2014 levels or at 50%. It all depends on Congress. However, given the fact that the Senate Finance Committee voted in favor of reinstated these provisions, we would expect Congress to pass it by the fall or early winter. However, while we believe that Congress will reinstate these tax benefits before the end of the year or by early next year, we would recommend though that you wait as long as possible to make your year-end purchases.
Do you have more Section 179 tax deduction questions? If so, please contact us.