Small business in limbo on tax breaks
NEW YORK — Small businesses are in limbo as they wait for Congress to make decisions that could save them a lot of money.
Bills in Congress would extend tax deductions widely used by small businesses making equipment or property purchases. One, known as the Section 179 deduction, has shrunk to a maximum $25,000 this year from $500,000 in 2013. Another, called bonus depreciation, expired at the end of last year.
The deductions are a big deal for small companies, saving them thousands or even millions of dollars on capital investments. But because Congress decides every year how big the deductions will be, owners can't plan their equipment budgets until lawmakers vote. And in recent years, worried about the ballooning federal deficit, Congress has put off those votes, sometimes until late in the year.
The annual uncertainty hurts small businesses looking for a break when their combined federal and state tax rates run as high as 40 percent, says Doug Bekker, a certified public accountant with the firm BDO in Grand Rapids, Mich. They don't know if they should make the purchase in the current year or defer it. And as the economy gets stronger and businesses are more profitable, they're concerned about tax bills.
“If you talk to the typical small business out there, there's a very high level of frustration,” Bekker says.
The Section 179 deduction, named for part of the U.S. tax code, allows small businesses to deduct up-front the cost of equipment such as vehicles, computers, furniture and manufacturing machines rather than depreciate them over a period of years. The deduction fell to $25,000 for 2014 because Congress hasn't approved a higher amount.
Many small businesses rely on the deduction. In a survey of more than 1,100 owners by the advocacy group National Small Business Association, 34 percent said they take advantage of it.
Before the recession, the deduction was fairly predictable, rising to keep pace with inflation. In 2007, Congress voted to nearly double it to $250,000 to stimulate the economy. It was $500,000 the next three years, but the final vote on a 2012 deduction didn't come until the beginning of 2013 — too late for anyone who had decided against a purchase in 2012.
Bonus depreciation is another break small businesses want back. It allows companies to take an immediate deduction for 50 percent of the purchase price of equipment or real estate, with the remainder depreciated over a number of years.
There may be good news for owners who have been frustrated by a lack of clarity. House Ways and Means Committee Chairman Dave Camp, R-Mich., has proposed setting a permanent amount for the Section 179 deduction as part of a bill that would revive bonus depreciation and other business and individual tax breaks.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Shale gas violations down as DEP steps up inspections
- Allstate patents driver analysis
- Macy’s prepares outlet stores
- Trib Total Media puts 9 Western Pa. newspapers up for sale
- Hackers have wide reach
- Fund fees within investor control
- US stocks pare losses after 1,000-point Dow plunge
- Bonuses on the rise, but fewer workers receive them, survey shows
- ‘Rank and yank’ doesn’t meet all expectations
- Federal Reserve Vice Chairman Fischer in spotlight as meeting nears
- Clean Air Council challenges Sunoco Pipeline’s public utility status