Last-Minute Tax Talk Seasoned accountants share late in the game tax strategies
By Jeff Lovelady and Richard Bell Guest Writers
There’s an old saying that it’s never
too late to start planning. But if you’re just now starting on your tax strategy for this year, it’s almost too late for motor carriers to execute a sound stra- tegic tax plan for year-end. But, there are still a few things you can do to soften that tax burden and take advantage of some of the 2014 rules that might benefit your company. As always you should consult your tax professional before making any decisions, but you can start with these five strategies to help reduce your tax burden and offset some of the tax consequences of having a good 2014. Remember the clock is tick- ing, and you will need to make decisions and implement these before the clock strikes midnight on Dec. 31. After that it’s Happy New Year and time to start a true strategic tax plan for 2015. Let’s start with strategy num-
ber one.
STRATEGY ONE - SECTION 179 AND BONUS DEPRECIATION It appears that the tax break
extenders bill is headed to the President’s desk and all indications are that he will sign it. It extends the tax breaks for 2014 only. They will be ret- roactive back to Jan. 1, 2014 and will expire again on December 31, 2014. The tax code allows businesses to
deduct the full purchase price of equip- ment, software and/or vehicles pur-
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chased or financed during the tax year. The deductions from the Section 179 IRS code were enacted in 1958 as an incentive to encourage businesses to buy equipment and invest in themselves. Through most of history, the Section 179 deduction was limited to less than $25,000 each year. However, in 2003, 2008 and 2010 that limit increased
reduced dollar for dollar the available deduction. For example, if a taxpayer purchased $2.4 million of qualified property, the maximum amount of 179 expense available would have been $100,000. If the President does not sign this bill, this limit will be reduced to $25,000 with the purchase cap set at $200,000. If a taxpayer purchases $225,000 of qualified property in 2014, then any available Section 179 expense deduction is reduced to zero. In addition to the Section
179 deductions, the Bonus Depreciation has been extended as well. Normally, depreciation occurs
a little at a time over several years, but Bonus Depreciation, a tax incentive for businesses, allows a taxpayer to deduct up to 50 per- cent of the cost in the first year. Bonus depreciation, like Section 179, incentivizes business invest- ments, and it applies to new, not used, purchases. Taxpayers could basically
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write off 50 percent of the cost of certain qualified property purchased during the year. The remaining 50 percent was then
from $25,000 to $100,000, to $250,000 and to $500,000 respectively. Congress has voted to extend the
$500,000 deduction limit. Taxpayers will reap the benefits of this change for 2014. This extension allows a tax- payer to take a 179 expense on up to $500,000 of qualified asset purchases as long as the cost of the qualifying property did not exceed $2 million. Any amounts purchased over that cap
subject to normal depreciation meth- ods. This option is a part of the tax break extenders bill as well, and it will also benefit companies that have made large new asset purchases in 2014. Basically, these methods were
allowing taxpayers to defer taxes to the future. It is basically too late in the game to make any significant asset purchases before December 31, carri- ers should have already bought equip-
ARKANSAS TRUCKING REPORT | Issue 6 2014
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