Better hope for some changes.

[farmerbyron]

Might be a bit confusing but as it was explained to me, in 2013 you can deduct up to $500,000 of capital expenses when you purchase something for your business but that limit will be reduced to a $25,000 total deduction for 2014. For businesses, this will severely limit the amount of equipment you purchase because if you cannot realize the expenses to offset your tax bill, you will have to save that money to pay the tax man a huge cut. The result is less reinvestment into businesses and an overall contraction of business activity.

Just think how this will effect companies like John Deere, Caterpillar, Case IH, Peterbuilt, etc. that rely on business reinvestment for the vast majority of their sales. If a business is not allowed to deduct these expenses, they will simply be purchases not made.

IMO, this is what happens when you let bureaucrats that have never spent a day in the private sector make tax policy. If this rule goes unchanged, it would probably be a good idea to short the market, especially on those companies that rely on business reinvestment for their bottom line. Bunch of friggin idiots at the helm of this country.


http://www.businessnewsdaily.com/5476-section-179.html

Section 179 Deduction: Rules & Limits

Ryan Goodrich, BusinessNewsDaily Contributor | November 15, 2013 06:45pm ET

Section 179 is a federal rule that allows small businesses to recognize immediately the expense of certain fixed assets. Taking advantage of Section is very important because it can provide a great tax boon for small business owners.

Nearly every business has equipment and property that depreciates with time. Rather than being forced to deduct an asset’s value over the course of several years, Section 179 allows businesses to get the entire depreciation deduction in a single year, a practice known as first-year expensing.

How Section 179 works

If you were to purchase all-new desktop PCs for every employee, you’d be forced to deduct a portion of each computer’s cost over multiple years according to the regular depreciation rules. For the next five years, you’d only be able to deduct fractions of the overall expense. Section 179 allows for the immediate deduction of the entire expense in a single year instead of being forced to track depreciation for a computer that doesn’t typically offer a long useful lifetime. While this section of the tax code doesn’t increase the total amount you can deduct in a single year, it allows you to benefit from the deduction all at once.


The U.S. government created this incentive to ultimately encourage companies to invest in themselves and buy equipment to improve the services they can offer. In previous years, Section 179 was often referred to as the “SUV Tax Loophole” or “Hummer Deduction” due to how often the tax deduction was used in writing off the purchase of qualifying vehicles.

While the positive impact of Section 179 has been reduced severely for such vehicle write-offs, small businesses are in a better position to realize the value of deducting expenses in the same year for purchases of vehicles, machinery, software and other office equipment. Many business owners prefer to write off entire equipment purchases the year they buy it. In years past, many companies avoided purchasing new equipment because they’d have to wait several years to realize the tax write-off in its entirety.

Section 179 limits

All new and used equipment is eligible for deduction up to $500,000 for 2013. All companies that lease, finance or purchase business equipment valued at less than $2 million still qualify for the Section 179 deduction, though any amounts beyond that limit affect the deduction value of any expenses. In unprofitable years or years with no taxable income to use for a deduction, businesses can still use a 50 percent “Bonus Depreciation” and carry forward the remaining deduction to the next year.

Assets eligible for deduction include anything from off-the-shelf software to business-use vehicles. Even some property types are eligible, provided the property meets a specific set of requirements set by the IRS. Any equipment declared for the Section 179 deduction must be put into service during the year it is declared on tax forms.

Companies with more than $2 million in purchased equipment won’t benefit as greatly from Section 179. Expenses over that maximum amount begin to decrease on a dollar-for-dollar deduction scale, effectively gearing this tax code toward small and medium-sized businesses.

Businesses are likewise limited in their deductions and cannot declare more than their net taxable business income. Net taxable income is best calculated by removing all deductions with the exception of Section 179, employment tax and net operating losses.

Changes in 2014

Every year, the IRS alters the benefits associated with Section 179. For example, the deduction limit, which was $500,000 in 2013, will be reduced to $25,000 in 2014. Also, the equipment purchase limit of $2 million will be cut to $200,000 after 2013.

 

[Spata]

1116 days until pres obama is replaced.

 

[farmerbyron]

There will not be anything left if crap like this happens.

I need to purchase a few replacement cattle but at $2k a piece, that $25k limit will only get me about 12.5 cows before I am hung out to dry to the IRS. Rat bastards.

 

[ChuckC]

Crap, I was hoping they would extend it again. Guess I should have went ahead and bought that cnc router I've been planning to buy.

 

[SlugSlinger]

Record tax revenue collections will continue, for the short term, then the depression.

 

[Johnny]

John Deere does somewhere in the range of 3 billion in sales. I don't see 500,000 hurting them. This will kill growth for manufacturing companies that sell >10 million and maybe turn a 10% profit.

 

[farmerbyron]

John Deere does somewhere in the range of 3 billion in sales. I don't see 500,000 hurting them. This will kill growth for manufacturing companies that sell >10 million and maybe turn a 10% profit.

John Deere sells their equipment primarily for business purposes. This will very much effect their bottom line. It's not about the laws effects on them, it's about the ripple effect from all the businesses being unable to write off equipment purchased from JD so they will reduce their expenditures with JD.

 

[RETOKSQUID]

Mom and Pop operations are going to hate life even more.

 

[farmerbyron]

It's pretty clear the goal is to try and make businesses pay more taxes by taking away deductions. However, they are too stupid to realize that those tax deductible expenses drive a large portion of our economy and any increase in tax revenue will be lost due to reduced economic activity.

 

[Johnny]

John Deere sells their equipment primarily for business purposes. This will very much effect their bottom line. It's not about the laws effects on them, it's about the ripple effect from all the businesses being unable to write off equipment purchased from JD so they will reduce their expenditures with JD.

I didn't think of it that way. Now I am even more depressed. They are gonna kill the business man.