December 21, 2015

Businesses seeking to maximize tax benefits through 2015 year-end tax planning may want to consider several general strategies, such as use of traditional timing techniques for income and deductions, and the role of the tax extenders which were just renewed over the weekend.

Sec. 179 Expensing
Many businesses have utilized the $500,000 annual Code Sec. 179 expensing as a key component of year-end tax planning. Code Sec. 179 property is generally defined as new or used depreciable tangible Code Sec. 1245 property that is purchased for use in the active conduct of a trade or business. Off-the-shelf computer software is included as is qualified real property (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property). The enhancements to Code Sec. 179 expensing have been renewed by Congress for 2015.

Bonus Depreciation
Similarly, 50% “bonus depreciation” has been a valuable incentive for many businesses. Qualified property for bonus depreciation purposes must be depreciable under the Modified Accelerated Cost Recovery System (MACRS) and have a recovery period of 20 years or less. These requirements encompass a wide variety of assets. Year-end placed-in-service strategies therefore can provide an almost immediate “cash discount” for qualifying purchases. Although a bonus-depreciation election should be factored into a year-end strategy, a final decision on making it is not required until a return is filed. Further, bonus depreciation is not mandatory. Certain taxpayers should consider electing out of bonus depreciation to spread depreciation deductions more evenly over future years.

These are just some of the considerations that make up year-end tax planning for businesses. Please contact our office so we can discuss your 2015 year-end business tax planning in detail.