Equipment Purchases and the Fiscal Cliff Deal..What Does it All Mean?

H.R. 8 (112th), the American Taxpayer Relief Act of 2012 (a.k.a. The Fiscal Cliff bill), was passed by congress just days ago. This allows for some significant tax savings on technology investments in 2013. Here are the details:

SECTION 179 TAX BREAK BENEFIT IS NOW $500K FOR 2013

Subject to limitations, Section 179 allows taxpayers to take an outright deduction equal to the full purchase price of qualifying equipment purchased during the tax year.The limitations on the deduction for tax years that begin in 2013 include:

  1. an aggregate cap on the Section 179 deduction of $500,000
  2. a dollar-for-dollar reduction in that cap to the extent that the cost of qualifying equipment placed by the taxpayer during the tax year exceeds $2,000,000
  3. the deduction cannot reduce taxable income below $ -0-
  4. other applicable limitations

Contact your tax advisor to confirm how you may benefit from this tax break.

50% BONUS DEPRECIATION BENEFIT EXPIRES DECEMBER 31, 2013

Taxpayers who use up their entire $500,000 Section 179 tax deduction, or have exceeded the $2,000,000 Section 179 phase out threshold, can turn to the 50% bonus depreciation deduction for a big tax advantage on qualifying equipment acquisitions before December 31, 2013. 50% bonus depreciation generally allows for an outright deduction of 50% of the otherwise depreciable cost of the equipment. In addition, taxpayers enjoy the regular depreciation deduction (e.g., 20% of the depreciable amount in the first year if 5 year MACRS depreciation applies) on any amount in excess of the Section 179 deduction and the bonus depreciation deduction.

REGULAR FIRST YEAR DEPRECIATION DEDUCTION

A 20% first year depreciation deduction may be used for the first year the equipment is in service, assuming a MACRS recovery period of 5 years.

NOTE: The deduction limitations set forth herein are subject to inflation adjustments under the Internal Revenue Code changes in the law. It is based on assumptions that may not apply to your business or to your transaction. This is not tax advice. Please see your tax advisor to be certain as to how Section 179 will apply to your specific situation.

As you plan your purchases for the year, contact A/E Graphics and we can help you estimate your tax savings instantly.

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