Small Businesses Get Big Tax Break

Hidden in the back of the big omnibus bill that passed just days before Congress broke for the holidays was an important new change in the tax laws. It gives a boost to small and mid-sized businesses, and might help stimulate the economy.

The change applies to something called the Section 179 deduction ( and this tax calculator for the specifics) and it establishes a permanent deduction for purchases of qualifying equipment.

I know — taxes and depreciation schedules put you into a coma. Before your eyes glaze over, follow what this means. Before, when a business bought or leased a piece of equipment, some of the costs were written off each year through depreciation. This offered businesses some incentive to invest in equipment, but it made their accounting and taxes more complex than necessary.

The change to Section 179 eliminates that depreciation schedule. Small companies can simply purchase as much as $500,000 in business-related equipment and write it off that year. It’s a much simpler approach to making and accounting for capital expenditures.

Continues at A Break for Small Business



What's been said:

Discussions found on the web:
  1. Iamthe50percent commented on Jan 4

    However, the businesses are then carrying equipment as having zero value when in fact it has value as used equipment. Thus there business is undervalued. It’s a distortion. Only consumables should be written off in full.

    Next year they will whine that their equipment is losing value and they don’t get a tax break for that.

    • KDawg commented on Jan 4

      Take stimulus spending anyway you can get it. Let’s not become Europe.

      Don’t forget that the Fed is raising interest rates, which is great for controlling asset bubbles, but we’re still iffy on a sustainable recovery. I’m happy that at least some of the cheap money being taken out of the economy is being offset with things like this.

    • jbegan commented on Jan 4

      What Iamthe50percent said! Yep! And expect a big flurry of purchases this year coming, which might do something for the economy, but then what?

  2. PrahaPartizan commented on Jan 5

    This should help small businesses get a foothold either in starting or expanding. A new business trying to get rolling has large start-up costs in terms of equipment and facilities but the first year’s performance might not totally cover those initial investment expenses. Paying taxes on those illusory profits during the start-up can be both difficult and galling. This new approach does seem to offer a better approach, so long as some folks don’t figure out how to game it.

  3. Marc P commented on Jan 5

    The government keeps trying to stimulate the short term. Too bad reality is long term. Obviously if cap ex is artificially stimulated for 2016, then aggregate cap ex will be lower in future years. Obvious to anyone except Congress perhaps.

    Next up: Congress will pass a law saying that if a business declares on a tax form that it plans to make cap ex in 2017 it will get a 100% write-off in 2016. Yipee!

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