I also own a prominent accounting firm called RA Tax and Accounting. We specialize in serving the contracting industry. Anyway, we have been advising our clients about Section 179 depreciation and we thought your business might be interesting in knowing this too.

A significant enhancement to Section 179 has passed the Senate and was signed by President Obama on December 19th.

Here’s what you need to know about this enhancement:

1. The total amount a business can write off this year for equipment and software just increased from $25,000 to $500,000.
2. This is retroactive to January 1, 2014. That’s great news too.
3. This exception will expire on December 31, 2014. It is only for this year!
4. These tax savings apply whether they pay cash, use a credit card, or finance the sale.

Why this is important to you:

Example 1

Business X will report a profit of $100,000 on their 2014 corporate tax return.

If in a 35% tax bracket, they will owe $35,000 in taxes.

However if they buy equipment for $100,000 and write off the full $100,000 under Section 179, they pay nothing in taxes.

Result: They invest $100,000 and reduce their taxes by $35,000.

Example 2

Business X will report a profit of $100,000 on their 2014 corporate tax return.

If in a 35% tax bracket, they will owe $35,000 in taxes.

However if they finance their investment of $100,000 (and only make a small down payment), they can still write off the full $100,000 under Section 179. They will pay nothing in taxes!

For more information, go to www.section179.org. Be sure to speak to your accountant about deductibility. It’s important to have quarterly planning meetings with your accountant, especially before the end of each year.

James R. Leichter
Mr. HVAC