As the end of the year approaches, there are a significant number of tax breaks and deductions remaining in limbo for businesses. Congress and the President are working to resolve these and many others before the end of the year, which is now a short three weeks away.
Below are some of those most likely to affect our readers.
- The 50% bonus depreciation allowance for new equipment expires at the end of 2012.
- The Research and Development Tax Credit, which expired at the end of 2011.
- The 15-year depreciable life for qualified leasehold, restaurant and retail improvements, which expired at the end of 2011.
- The Section 179 deduction, which allowed up to $139,000 in deductions for capital equipment placed in service in 2011, will be reduced to $25,000 (plus a small inflation increase) for 2012.
These are in addition to the individual items covered in last week’s blog posting.
The acting commissioner of the IRS has warned Congress several times that failure to resolve the expired and expiring provisions by the end of the year may delay the filing of most business and individual tax returns. Even if Congress and the President reach an agreement by year end, there may still be delays as the IRS rushes to update their computer systems, along with tax software providers.
To add to the complexity and uncertainty, most states use some form of the taxable income amount determined on the federal tax return as a starting point for state taxes. This means once the federal tax code is determined, the states will have to scramble to adopt all, some, or none, of the new federal laws and also retool their computer systems for the changes.
We’ll be keeping up on the latest, and as always, we’re here to help you navigate the ever-changing landscape.