On December 18th, Congress and the President finally agreed to a deal on the annual tax extenders known as the Protecting Americans from Tax Hikes (PATH) Act of 2015. However, unlike past tax extenders legislation which would extend these provisions for only a year or two, PATH makes many of these provisions permanent.
In a previous article, we summarized certain provisions that impact individual taxpayers. Below is a summary of a few of the more popular business-related provisions.
- Section 179 deduction – Permanent
- The maximum a taxpayer could elect to expense under Section 179 in priors years has been set at $500,000 on qualifying purchases up to $2,000,000.
- Before the passing of PATH, the maximum Section 179 deduction a business could elect for 2015 was $25,000 on purchases up to $200,000.
- PATH permanently increased this amount to $500,000 and $2,000,000, respectively. In addition to making the $500,000 limit permanent, it is now indexed for inflation.
- Finally, you can go buy that new equipment for your business without having to ask your accountant if you will be able to deduct the expense.
- Fifteen Year Depreciation for Qualified Real Property Improvements – Permanent
- Under PATH, the 15-year straight-line depreciation method is extended permanently.
- Applies to qualified leasehold improvements, qualified restaurant property, and qualified retail space improvements.
- Without this extension, many improvements would have been depreciated over 39 years.
- Bonus Depreciation – Extended through 2019
- Bonus Depreciation is an extra depreciation allowance equal to 50% of the cost of qualified property placed in service through 2017, 40% in 2018, and 30% in 2019.
- Some great news for taxpayers placing new passenger automobiles in service is the extra $8,000 in Bonus Depreciation allowed.
- Without PATH, the maximum allowable depreciation allowed for passenger autos would have been $3,160 in the first year of service.
There are several other provisions that have been impacted by this legislation but are beyond the scope of this article. For questions about your specific tax situation and concerns, call and speak to a professional with Schanel & Associates at 561-624-2118.