Generous Write-Offs Available For Equipment Purchases, businesses have additional incentive to purchase machinery, equipment, and various other assets this year. In a bid to increase business spending on capital investment, Congress has added new incentives as part of the 2010 Tax Relief Act.
The new law allows businesses to write off 100% of the cost of qualifying assets placed in service after September 8, 2010, and before January, 1,2012, instead of claiming depreciation deductions for those assets over several years. No dollar limit is placed on the amount of asset purchases eligible for the 100% write-off.
Almost all machinery, equipment, office furniture and fixtures, and vehicles – as well as most computer software and certain leasehold improvements – can qualify, as long as the asset is a new rather than a used item. But a full first- J.. ear writ(\’-off May not be available for a new business auto since the \”luxury auto\” limits on deductions still apply.
Section 179 Expensing
The Section 179 expensing election stays on the books for 20 II with a $500,000 dollar limit and a dollar-for dollar reduction in the limit as Section 17D-eligible asset purchases exceed $2,000,000. Under a temporary provision, businesses may elect to treat as much as $250,000 of qualified real property as Section 179 property. Qualified real property consists of certain leasehold and retail improvement property and certain restaurant improvements.
For 2012, the maximum amount that can qualify for Section 179 expensing will fall to $125,000, and the phase out of the Section 179 limit will begin as the year\’s eligible asset purchases exceed $500,000. The election won\’t be available for any real property. As always, the available Section 179 deduction is limited to a taxpayer\’s taxable trade or business income.
And. although the 100% write-off will no longer be available, the 2010 Tax Relief Act will allow businesses to elect 50% additional first-year bonus depreciation for qualifying assets placed in service in 2012 .
Tax Report March 2011 \”AMT Update\”
A Congressional Budget Office (CBO) issue brief released In January 2010 predicted that if nothing was changed for 2010, the alternative minimum tax (AMT) would affect one in six taxpayers, who would pay on average an additional $3,900 III tax. The CBO further predicted that nearly every married taxpayer With Income between $100,000 and $500,000 would owe some AMT
The CBO observed in its report that the AMT tends to affect married couples, large families, and taxpayers who have greater deductions for state and local taxes. Deductions for personal exemptions and state and local taxes are not allowed in computing AMT
Fortunately, lawmakers did enact another AMT \”patch\” as part of the 2010 Tax Relief Act Along With a few other AMT-related changes, the AMT exemption amounts for 2010 have been increased to $72,450 for married couples filing joint return, $47,450 for unmarried Individuals, and $36,225 for married individuals filing separate returns.
For 2011, the AMT exemption amounts are somewhat higher $74,450 for married couples filing a joint return, $48,450 for unmarried Individuals, and $37,225 for married individuals filing separate returns.
As things now stand, the AMT exemptions are set to drop dramatically after 2011 stay tuned.
March 2011 Page 4