Depreciation Tax Deduction Expired? Plan Correctly for 2014

Oh where, oh where did my depreciation deduction go?

Many business owners plan each year to drastically reduce their tax bill by claiming accelerated depreciation deductions on capital expenditures. However, fifty-seven tax provisions expired at the end of 2013 and six more are scheduled to expire at the end of 2014, Congress may extend many of these provisions (in some cases retroactively to the beginning of 2014), but that likely won’t happen until a month or more after the recent midterm elections which occurred on Nov. 4.

The following depreciation tax breaks expired at the end of 2013. Hopefully, Congress will pass legislation later this year to extend these provisions:

• 50% bonus first year depreciation for most new machinery, equipment and software
• Section 179 $500,000 annual expensing limitation
• 15-year write-off for qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property

The uncertainty over these expired tax provisions complicates year-end tax planning. It will be important to make sure that you have done the proper planning to ensure that you will have the cash required to make the necessary tax payments if these provisions are not brought back.

Other expired tax provisions to keep an eye on include the Research & Development credit, Work Opportunity credit, Empowerment Zone incentives, the health care coverage credit and a variety of energy-related tax breaks.

If you are not sure how these changes will impact your tax liabilities for 2014, please contact your MKS&H tax advisor and have us review your tax situation before the end of the year.

Article contributed by Jennifer Milas, CPA, MST, MKS&H Tax Manager

About MKS&H: McLean, Koehler, Sparks & Hammond (MKS&H) is a professional service firm with offices in Hunt Valley and Frederick. MKS&H helps owners and organizational leaders become more successful by advising them regarding their financial, technology and human capital management needs.

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