Background
In the past decade, Congress has frequently promoted business spending by increasing the Section 179 expensing opportunity or by providing a first-year bonus depreciation opportunity for capital expenditures. Both of those enhanced deductions expired at the end of 2009. For purchases after 2009, the 50% first-year bonus no longer applies. The Section 179 expensing limit was scheduled to drop to $134,000 for tax years beginning in 2010.
Hiring Incentives to Restore Employment Act of 2010
On Thursday, March 18, 2010, the President signed into law the HIRE Act (P.L. 111-47), to provide incentives for job creation. Among the direct job incentives is a provision to expand the Section 179 expensing limit to $250,000. The higher limit applies for years beginning in 2010.
The qualified purchases phase-out level for 2010 was scheduled to range from $530,000 to $664,000. Under the new law, the phase-out range is raised to $800,000 to $1,050,000.
No Extension of 50% Bonus Depreciation
The 50% bonus depreciation provision that was effective for new assets placed in service during the period January 1, 2008 through December 31, 2009, was NOT extended by the HIRE Act, nor is it included in either the House or Senate versions of the Extender Bill currently making its way through Congress. Unless added to the Extender Bill prior to its finalization, 50% bonus depreciation is inapplicable for assets purchased on or after January 1, 2010.
Summary
This represents the third consecutive year at the $250,000 expensing level. With businesses looking at tighter margins in 2010, we may see fewer taxpayers needing the additional deductions. Yet, it is good to have this weapon in the arsenal for planning 2010 income. As always, it is primarily about managing overall income level and marginal tax rates.
Please email if you have any questions.
Larry Kopsa CPA
