Looking at year-end tax planning? The Protecting Americans from Tax Hikes (PATH) Act of 2015 passed last year finally gives businesses the opportunity to plan well ahead of year-end. If you own a business, the PATH Act of 2015 contained an extension of the 50% “bonus depreciation” and also made permanent the elective business expensing of eligible business property costs (up to $500,000).
For property placed in service after Dec. 31, 2015, bonus depreciation is available for qualified property that meets the following requirements:
- New MACRS property with a recovery period of 20 years or less, computer software, water utility property, and qualified improvement property;
- Original use must begin with the taxpayer; and
- Placed in service before Jan. 1, 2020.
Bonus depreciation may result in substantial present value tax savings for businesses that already had plans to purchase or construct qualified property. Unlike section 179 expensing, taxpayers do not need net income to take bonus depreciation deductions. Further, bonus is not limited to smaller businesses or capped at a certain dollar level, but it is not available for used property, property used outside of the US, tax-exempt use property, or tax-exempt financed property.
Contact us to review your options.