tax code includes Section 179, which permits
first-year deduction (expensing) of amounts
spent for business equipment. This provision
formerly allowed annual deductions up
to $25,000. After $200,000 of equipment
outlays, the allowance phased out, dollar-for-dollar.
had raised these amounts sharply in recent
years, but the increases expired periodically,
going back to the original amounts. The
latest expiration occurred at the end
of 2014, so the smaller limit was officially
in effect until passage of the PATH Act
in late 2015.
higher Section 179 limits are permanent.
For 2015, expensing up to $500,000 of
equipment is allowed, and the phaseout
doesn't begin until $2 million of purchases.
Both the $500,000 and $2 million amounts
will be indexed for inflation, starting
1: ABC Corp. spent $600,000 on equipment
in 2015. The company can deduct $500,000,
the permanent Section 179 cap, while the
other $100,000 can be depreciated under
2: XYZ Corp. spent $2,100,000 on equipment
in 2015. That's $100,000 over the $2 million
limit, so Section 179 expensing is reduced
by that $100,000, from $500,000 to $400,000.
If the company expenses $400,000, it can
depreciate the remaining $1,700,000 under
Act includes off-the-shelf computer software
as Section 179 property, which was not
always the case.
under Section 179,"bonus" depreciation
has allowed additional first-year depreciation
deductions for amounts spent on certain
business equipment. That provision, which
expired after 2014, has not been made
permanent; instead, it was extended through
2019. For 2015 through 2017,50% of the
relevant cost may be deducted. That number
will fall to 40% in 2018 and 30% in 2019.
The PATH Act also gave permanent status
to the research & development tax
credit (R&D credit), retroactive to
2015. This credit can be used by companies
that increase their qualified research
expenses. Qualified research expenses
includes the costs of in-house qualified
research and amounts paid to outside contractors
for qualified research. If the credit
can't be used currently, it can be carried
forward or transferred in an acquisition.
companies may be the main users of this
tax credit, but firms in all fields may
get some benefit. Tracking R&D costs
to qualify for the credit can be complex,
however. Our office can help your business
set up the procedures to make the most
of this tax break.
As part of the Affordable Care Act, employer-provided
health insurance deemed to provide excessive
benefits will be subject to a special
tax. This tax was supposed to take effect
for tax years beginning after 2017, but
the PATH Act postpones the start date
for two years. This gives employers more
time to evaluate their health plans and
phase in any changes.
the new tax law provides that a company
paying the so-called "Cadillac"
plan tax will be able to deduct the amount
paid from its income tax. Thus, the actual
cost of the Cadillac plan tax may be reduced.
April 2016 AICPA Client Bulletin