There may be some hope for business owners currently holding off on buying equipment as they wait for Congress to decide whether to raise the limit on the amount companies can deduct for capital purchases.
Section 179 deductions allow companies to write off depreciation on large purchases in one year instead of spreading the deduction over five to seven years, but the tax code provision puts a cap purchases that qualify.
The deduction ceiling for 2014 is $25,000 and will remain at that level unless Congress votes to raise it, meaning only $25,000 in equipment or major purchases qualify for the immediate deduction. In 2013 the limit was $500,000.
Based on a survey by the National Small Business Association advocacy group, 34% of small businesses use the deduction, an Associated Press article reported, and some companies are waiting to make major purchases until they know if Congress will raise the limit.
The association’s website said Washington may be moving toward a decision as the Senate Finance Committee examined a legislative package in early April that includes raising the Section 179 deduction limit. The committee bill would next go to the full Senate.
The Senate legislation would return the Section 179 deduction ceiling to $500,000, the amount in place from 2010 through 2013 when business owners had a degree of certainty as the deduction remained stable before plummeting at the end of 2013, the website said.
The proposal calls for keeping the deduction in place for two years and also would expand the deduction to include computer software, the small business association website said. However, there is no date set for when Congress might take up the legislation.
The AP reported a House proposal would establish a permanent Section 179 deduction.
Congress could make any boost in the deduction cap retroactive and lawmakers would have to reconcile any differences between the House and Senate legislation.
The 179 deduction covers purchases such as computers, vehicles, machinery or other capital expenditures and periodically expires, such as what happened at the end of 2013, triggering the reduction from $500,000 to $25,000.
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