H.R. 5771: Tax Increase Prevention Act of 2014 (aka Tax Extenders Act) retroactively expanding the Section 179 deduction limits thru 12/31/2014 has been enacted. The new law reinstates the limit on Section 179 to $500,000 as well as reinstates 50% Bonus Depreciation.
The measure was passed by the House on Dec 3, 2014, the Senate on Dec 16, 2014, and signed into law by the President on Dec 19, 2014.
IMPORTANT NOTE! Only this 2014 tax year is covered by this measure – therefore it is a good business decision for many to finance equipment immediately to make the December 31, 2014 cutoff for the write-off provisions. Your business must apply for Section 179 Qualified Financing as soon as possible to make the cut-off at midnight 12/31/2014.
Technically, the bill is a one-year, retroactive extension of the tax breaks, even though it only lasts through the end of DECEMBER.
If you are self-employed or own a business, it’s your time of year! If you want to get a HUGE tax deduction on THIS YEAR’S return, you need to buy a full-size truck or SUV before the end of December. PLUS, with the huge rebates, and sky-high used car prices, you win all the way around!
Vehicles and other equipment are traditionally large expenditures for any business enterprise. Typically, if business property has a useful life of more than one year, the cost must be spread across several tax years as depreciation with a portion of the cost deducted each year.
There is a way to immediately receive these income tax benefits in one tax year. The provisions of IRS code section 179 allow a sole proprietor, partnership, or corporation to fully expense tangible property (new or used) in the year it is purchased and placed in service. This means that if you purchase a qualifying vehicle the last day of the year and place it in service that day, then the business miles driven that day divided by the total miles driven will be your business use percentage for determining the amount of the tax deduction for that year.
The tax law changes over the past few years have made this option more appealing by dramatically increasing the amount that can be written off. These changes that were first made in 2003 and then extended last week, means that businesses can write off more of their capital expenditures through the end of this month.
Under current law just enacted, a business can expense expenditures up to an overall investment limit of $500,000. The only catch is that the expenditure has to be used greater than 50% for business use and placed in service in the current year. Generally vehicles that weigh over 6,000-pounds qualify for this revision for immediate expensing. A special $25,000 limit applies to certain SUVs. Trucks do not have this limitation.
In lieu of Section 179, vehicles purchased have a special depreciation allowance of 50% of depreciable basis. To qualify, the automobile must be qualified property, with a gross vehicle weight rating of 6000-pounds.
Here is a list of 2014/2015 vehicles that FOR SURE qualify. There may be a few others I missed, but all these will qualify.
- Audi: Q7 TDI
- BMW: X5, X6
- Buick: Enclave
- Cadillac: Escalade
- Chevy: Silverado, Suburban, Tahoe, and Traverse
- Dodge: Durango and Ram pickup
- Ford: Expedition, Explorer, all F-Series pickups, Transit vans.
- GMC: Acadia, Yukon, all Sierra pickup
- Infiniti: QX56
- Jeep: Grand Cherokee
- Land Rover: LR4, HSE, Sport
- Lincoln: MKT, Navigator
- Mercedes: GL 350 diesel, ML350, R350
- Nissan: Armada NV, Pathfinder 4-wheel drive, Titan
- VW: Touareg hybrid
PLEASE BE SURE TO CONSULT YOUR OWN CPA TO MAKE SURE YOU QUALIFY.