What You Need to Know About Changes to Depreciation Before Buying New Equipment

Think you can write off that shiny new equipment like last year? Think again. The depreciation rules are different now.

If you’re a business owner you’ve probably always have one piece of equipment in mind – the one that needs to be replaced or purchased to make your business more profitable or your workflow easier. It could be new computers, manufacturing equipment, or anything that make your business run easier and smoother.

Normally, when a business purchases equipment, the expense must be capitalized and deducted over several years. However, in recent years, many of the small businesses that I work with have been able to purchase and deduct 100% of the cost of the equipment in the same year on their tax returns. This was possible using Section 179 and bonus depreciation which allow faster deductions for small business equipment.

However, under current law for 2014, bonus depreciation has gone away and the Section 179 depreciation limit has dropped to $25,000 (from $500,000) and you can only expense the $25,000 if you don’t spend more than $200,000 in capital assets. These changes are going to impact several of my clients this year and we are actively working to plan the best way to continue to purchase needed equipment and grow their businesses in the most tax advantageous way possible.

While it’s possible congress will go back and patch the law and extend the higher Section 179 limit or Bonus Depreciation (they’ve done it retroactively before), it hasn’t happened yet and probably won’t until close to the end of the year. It would be best to plan accordingly.

The tax code applying to your small business is complicated. Despite these negative changes for taxpayers, there are still ways your business can save on your 2014 tax return. To discuss your situation, call our office at 817.381.5520 or use our appointment request form to schedule an appointment.