Monday, November 14, 2016

IRS warns tax professionals of another email phishing scam
By Sally P. Schreiber, J.D.
November 4, 2016

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TOPICS
Tax
IRS Practice and Procedure
The IRS warned tax practitioners in an "urgent alert" that, in another brazen attempt to target tax professionals, scammers are sending fraudulent phishing emails asking practitioners to update their IRS e-services information. The emails claim that information was stolen from certain users' e-services accounts in 2015, and that their accounts need to be updated to ensure their information is protected (IR-2016-145).

The subject line for the fraudulent email is "Security Awareness for Tax Professionals," and the "From" line says, "Your e-services team." The email has an IRS logo and an e-services logo, which links to a spoofing website that purports to be an e-services registration page. The scammers are attempting to steal usernames and passwords and other personal data and are also exploiting the IRS's current program of attempting to strengthen tax professionals' e-services authentication process.

Practitioners who have mistakenly clicked on the email and provided their usernames and passwords, should contact the e-services help desk to reset their accounts. If they use the same information for other accounts, those should be changed as well. The IRS recommended that those practitioners perform a deep security scan on their computers and reevaluate their security controls.

The IRS also advised tax professionals to use effective security software, encrypt taxpayer data, use strong passwords and change them often, learn to recognize phishing emails, not click on links or download attachments from suspicious emails, and be wary of unusual IRS communications.

—Sally P. Schreiber (sschreiber@aicpa.org) is a JofA senior editor.

- See more at: http://www.journalofaccountancy.com/news/2016/nov/irs-warns-tax-professionals-phishing-scam-201615483.html#sthash.4IVSzvQq.dpuf

Trump Tax Plan Could Impact 2016 Year-End Planning

Robert W. Wood , CONTRIBUTOR
I focus on taxes and litigation.

Opinions expressed by Forbes Contributors are their own.
Donald Trump’s surprise victory first rattled markets, then invigorated them. It triggered protests, and in some circles, is even fueling a “CalExit” movement for California to break away from the union. But, it could invite some tax planning, too. Candidate Trump made no secret of his view that our tax system needs reform. He even sounded briefly Warren Buffet-like. He blamed the tax laws for making it possible for him to manipulate the tax law to pay so little via his controversial $916 million net operating loss!

With Republicans retaining control over the House and Senate, some tax cuts are inevitable. With this quite extraordinary confluence of events, President-elect Trump and Congress might tell the tax code, “you’re fired!” This could suggest that deferring income into next year if you can might be wise. Next year, the rates should be lower. Under current law, we pay tax on ordinary income tax at graduated rates stretching from 10 percent to 39.6 percent.

trump

But since Obamacare, high-income taxpayers pay an additional 3.8% surtax on net investment income. That means the top federal rate for individuals is really 43.4%. Qualified dividends and long-term capital gains are taxed at 15% or 20%, depending on your income. Yet, that rate too gets hit with the additional 3.8 % for Obamacare’s net investment income tax. Here are 5 key things about the Trump tax plan:

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1. Individual Rate Cuts. Trump proposes cutting the tax brackets to three: 12, 25, and 33%. He would eliminate Obamacare’s 3.8% net investment income tax, too. As a result, the top rate would be 33%, with the top rate on capital gains and dividends a firm 20%. There are some drawbacks, though, that may alter your usual tax planning. For example, Trump’s tax plans call for slashing itemized deductions. Under Trump’s plan, personal exemptions are eliminated. High earners already do not deduct personal exemptions due to the phase out, so this should have little impact. More consequential, though, is that itemized deductions would be capped at $200,000 for married couples. Paying state taxes before year-end means you can deduct them now. And the same for charitable contributions.

2. Business Tax Cuts. Businesses are supposed to be in for big tax cuts. Corporations currently pay 35 percent. President-elect Trump would cut it to 15 percent. But he would eliminate most business deductions. And there would be simplicity. Instead of depreciation over many years, he would allow up-front deductions. But forget deducting interest on debt, he has suggested. LLCs, partnerships and S corporations would have changes too. Candidate Trump suggested that the owners of these entities should pay the same 15 percent rate as corporations. Astoundingly, that could mean someone taxed at 39.6 percent or even 43.4 percent on flow-through business income now, could see their tax rate slashed to 15 percent! Of all the proposed tax changes, this one — if it happens — may be the most momentous.

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Already, some people are wondering if they can cash in. For example, can wage earners who are paying high income taxes now become independent contractors by forming an entity and conducting their own business? If you pay 39.6 percent now and could pay 15 percent by doing that, the incentives are huge. Of course, there are already huge fights and audits over worker status issues. And this change (if it happens) would most likely increase them. It is hard to figure how to handle this one before year-end. Some people will

3. Overseas Profits. Another change that could impact many international companies based in the U.S. would address the billions in overseas profits. These billions are currently escaping the U.S. tax system entirely. Trump’s plan would impose up to a 10 percent deemed repatriation tax on the accumulated profits of foreign subsidiaries of U.S. companies.

That 10 percent toll charge would be payable over 10 years, Trump has proposed. Trump and his team say this change would trigger a huge inflow of funds back to the U.S. And for the future, Trump’s proposals would tax future profits of foreign subsidiaries of U.S. companies each year as the profits are earned. With these changes possible, companies will wait and see.

4. No Death Tax. The estate (or death) tax is another one Trump hates, though you probably just have to wait to see on this one. It still pays to have some kind of estate plan until then. And try to stay healthy! Under current law, you can pass up to $5.45 million to your heirs tax-free. That is doubled for a married couple. But beyond this, you pay an estate tax of 40 percent. It is entirely separate from income taxes. Hillary Clinton had proposed cutting the exemption materially from $5.45 million to $3.5 million. She also wanted to raise the estate tax rates to 50 percent and even 65 percent in some cases. The president-elect said he would repeal it entirely.

If the estate tax is repealed, step-up in basis at death will go to. Under current law, for income tax purposes, any appreciation in your assets gets a stepped-up basis to the value on your date of death. That way you don’t pay both income and estate tax on exactly the same dollars. But if the estate tax is repealed, Trump’s proposal would allow income tax on the appreciation inherent in the assets for an estate valued in excess of $10 million. However, you would only pay this income tax when the beneficiary sells the assets.

5. Top v. Bottom. Not everyone is wild about the Trump proposals. Much of the criticism of Trump’s tax plans are that he would give the biggest breaks to the highest earners. Yet supporters like to invoke President Reagan. Trump and his team have suggested that loosening of capital at the top will encourage investment, trigger transactions, create jobs and fuel economic growth. Change in the tax world is constant. Yet by any standards, some of the tax changes likely in 2017 and beyond are going to be huge.

For alerts to future tax articles, email me at Wood@WoodLLP.com. This discussion is not legal advice.

Tuesday, December 10, 2013

5 Great Tax Reasons for Contributing to a 401(k) Plan

If you work for a company that offers a 401(k) retirement plan, think long and hard about what you want to contribute for 2014. The maximum contribution is $17,500 (plus $5,500 if you’ll be 50 or older by the end of 2014). You probably need to commit to your 2014 contribution now. There are 5 tax reasons for adding as much as you can.

1. Salary contributions aren’t taxed

The amount you add to a 401(k) plan is not currently taxable. Thus, if your compensation is $45,000 and you add $6,000 to the plan, your taxable wages for the year are $39,000. However, the deferred amount is still taken into account for FICA purposes, so you’ll accrue Social Security credits based on the salary you receive plus the amount you contribute to the plan.

Even better than income tax deferral is the fact that by lowering your adjusted gross income (AGI) by the amount of your contribution, you may qualify for a variety of tax benefits that have eligibility limits based on AGI. And if you are a high-income taxpayer, you may reduce or avoid the phase-out on exemptions and itemized deductions. Thus, your tax savings can be much greater than simply the tax saved on the portion of compensation added to the plan.

2. Contributions may generate a tax credit

The tax law lets you double dip by enjoying tax deferral as well as taking a tax credit. The retirement savers credit is up to 50% of deferrals up to $2,000 (top credit of $1,000); the credit percentage of 10%, 20%, or 50% depends on your filing status and modified adjusted gross income (MAGI). For 2014, some credit is still allowed for joint filers with MAGI up to $60,000 ($27,000 for singles; $29,250 for heads of households).

3. Employer contributions aren’t current income

Many employers make matching contributions to encourage participation or reward employees in the plan. Their contribution formulas may vary; usually they do not exceed 6% of compensation. Whatever amount is contributed by your employer to your account, it is not included in gross income now. You’ll pay tax on the contributions when you take distributions, which may not be until you retire and are in a lower tax bracket than you’re in when the contributions were made.

4. Borrowing lets you tap funds without tax

If you have an immediate need for cash, you can get it quickly by borrowing from your own account. Yourcredit score doesn’t matter and interest rates are low. All you need to do is ask your plan administrator for a loan; you don’t have to specify why.

The most you can borrow is 50% of your account balance or $50,000, whichever is less. You have to repay the loan in level amounts over no more than 5 years (longer if the funds are used to buy a home), but you can pay it off more quickly with no penalty. If you’re married, you’ll need your spouse’s consent to the loan.

5. Distributions are exempt from the NII tax

Distributions from qualified retirement plans and IRAs are not treated as net investment income (NII) for purposes of the 3.8% additional Medicare tax on net investment income. However, the distributions do count as part of MAGI, which could nonetheless help to trigger or raise the NII tax.

Conclusion

If you can’t afford to contribute the maximum, try to add as much as required to earn the maximum employer contribution. Working spouses with limited funds to contribute should coordinate their annual elective deferrals. When in doubt, talk with a tax advisor.

Wednesday, December 4, 2013

IRS warns of new Tax Scam

The Newsroom Topics

IRS Warns of Pervasive Telephone Scam

Versión en español

IRS YouTube Video:
Tax Scams: English | Spanish | ASL
IR-2013-84, Oct. 31, 2013
WASHINGTON — The Internal Revenue Service today warned consumers about a sophisticated phone scam targeting taxpayers, including recent immigrants, throughout the country.

Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.

“This scam has hit taxpayers in nearly every state in the country. We want to educate taxpayers so they can help protect themselves. Rest assured, we do not and will not ask for credit card numbers over the phone, nor request a pre-paid debit card or wire transfer,” says IRS Acting Commissioner Danny Werfel. “If someone unexpectedly calls claiming to be from the IRS and threatens police arrest, deportation or license revocation if you don’t pay immediately, that is a sign that it really isn’t the IRS calling.” Werfel noted that the first IRS contact with taxpayers on a tax issue is likely to occur via mail
Other characteristics of this scam include:

Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
Scammers may be able to recite the last four digits of a victim’s Social Security Number.
Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
Victims hear background noise of other calls being conducted to mimic a call site.
After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

If you get a phone call from someone claiming to be from the IRS, here’s what you should do:

If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.
If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.
If you’ve been targeted by this scam, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add "IRS Telephone Scam" to the comments of your complaint.

Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes) and solicitations (such as debt relief) that fraudulently claim to be from the IRS.
The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the e-mail to phishing@irs.gov.

More information on how to report phishing scams involving the IRS is available on the genuine IRS website, IRS.gov.

Affordable Health Care system a mess

December 2nd 2013 by Marty McCutchen

America’s healthcare system is a mess. We spend more per capita on healthcare than any other country on earth, and generally twice as much as our first-world peers. Yet, our health outcomes are no better than anyone else’s, and one in seven Americans has no health insurance.

That was the problem President Obama set out to solve with the 2010 “Patient Protection and Affordable Care Act” and companion “Health Care and Education Reconciliation Act of 2010.” Together, those two acts – better known by Republicans and Democrats alike as “Obamacare” – represent the biggest change in how we finance healthcare since Medicare was created in 1965. The two acts also include some of the most significant tax changes in a generation.

In this article, I want to briefly cover the most important tax and health insurance changes of the law. In future articles, I will give you a framework for making smart choices in the new healthcare environment. It’s also worth noting that whenever you may be reading these words, I’m writing them in the first week of November 2013. Insurance exchanges just started enrolling consumers (or attempting to enroll them, in the case of the federal exchange at www.Healthcare.gov). The Obama administration just announced plans to delay the employer mandate until 2015, and some Republicans in Congress are still working to repeal the whole thing.

Not a week passes without major news about implementing the law. There’s still much to learn about Obamacare and much that we simply can’t know yet. So … we’ll all have to keep our eyes open and our wits about us as events unfold.

2013 is a big year for tax changes:

Up until 2013, medical and dental expenses were deductible if they exceeded 7.5% of your adjusted gross income (AGI). Unless, of course, you’re subject to Alternative Minimum Tax (AMT), in which case they have to exceed 10% of your AGI. Starting in 2013, that floor rose to 10% of AGI for everyone. Unless you or your spouse are 65 or older – in which case it stays at 7.5% of AGI until 2016. Unless, of course, you’re 65 and subject to AMT.

If you participate in a healthcare flexible spending account at work, your contributions will be capped at $2,500/year, with no contributions for over-the-counter medications.

If your earned income is above $200,000 – or $250,000 if you file jointly – you’ll pay an extra 0.9% Medicare tax on earned income above those amounts. Given the new marginal tax rates in 2013 “fiscal cliff” legislation, that extra Medicare tax could help push your actual marginal rate well above 40%.

Finally, you’ll pay a 3.8% “Unearned Income Medicare Contribution” on investment income if your AGI is above those same thresholds. “Investment income” is defined as interest, dividends, capital gains, rents, royalties, and annuities. This new Medicare tax might not seem like a big deal, especially if your income isn’t high enough that you’ll actually pay it. Hey, it’s just 3.8%, right? How bad can that be? Well, leaving aside the fact that a new tax still hurts, this is the first time investment income has ever been subject to Medicare tax. In addition, lots of commentators fear it’s just the proverbial camel’s nose “under the tent” for even higher taxes. After all, it’s a lot easier for legislators to go from 3.8% to 5.8% than it is to go from 0 to 3.8%. So we’ll be paying lots of attention to this provision.

On the healthcare side, starting in 2013, the new law limits health insurance company deductions for executive compensation to $500,000 per person, as opposed to the regular $1 million for other businesses. It doesn’t stop insurance companies from paying their top executives more than half a million – it just stops them from deducting anything over that amount on their own tax returns.

2014 Changes:

Most individuals must maintain “minimum essential coverage” or face penalties.

Businesses with >50 employees must offer health coverage or pay penalty of $2,000/employee.

Insurance companies cannot deny adults coverage for pre-existing conditions

Plans can no longer set annual limits on coverage

Medicaid expands to cover all Americans with income up to 138% of poverty line

State-run insurance “exchanges” begin offering coverage to individuals and small businesses

2014 brings the most controversial changes. Specifically, this is the year when the “individual mandate” and “employer mandate” were both scheduled to begin:

Most individuals who aren’t covered through their employer will have to maintain “minimum essential coverage” or pay individual penalties. This is the so-called “individual mandate” you’ve heard so much about.

Employers with more than 50 employees must offer health benefits or pay a penalty of up to $2,000 per employee. If they offer coverage that doesn’t meet minimum standards, the penalty could jump to $3,000. The Obama administration has since postponed this requirement to 2015.

2014 is also the year when the biggest insurance and healthcare changes go into effect. Specifically:

Insurance companies can’t deny coverage to anyone for pre-existing conditions. Remember, starting back in 2010 they could no longer deny coverage to children for preexisting conditions.

Plans can’t set annual limits on coverage. Remember, the ban on lifetime limits took effect in 2010.

States can choose (or not choose) to expand Medicaid eligibility to non-elderly, non-pregnant individuals with incomes up to 138% of the federal poverty level. For 2014-2016, the federal government will pick up 100% of those costs.

The law requires states to establish insurance “exchanges,” or join a federal exchange, where individuals and small businesses can comparison-shop for coverage.

All health insurance plans must provide coverage for “essential benefits,” in categories such as maternity care, substance abuse services, mental and behavioral health services, and prescription drugs. The trade association America’s Health Insurance Plans, which represents 1,300 health insurance companies, estimates that these “essential benefit” provisions may raise premiums as much as 33% in states that currently allow more stripped-down plans.

2018 Changes

The law doesn’t specify any significant new changes in years 2015-2017. But finally, in 2018, it imposes a 40% excise tax on “Cadillac plans” costing more than $10,200 per year for singles or $27,500 per year for families. The goal here is simply to rein in costs on these most-expensive plans, and they really are pretty pricey – the average American family doesn’t pay nearly that much for its mortgage. There’s evidence to suggest this provision is already working.

Employers who are likely to be affected by the tax have begun cutting back on some of the most generous plans by raising deductibles, co-pays, prescriptions, and the like. But this provision doesn’t take actual effect until 2018 – which some commentators think means it won’t ever take effect at all.

Editor’s Note: Sign up for a free subscription to Marty McCutcheon’s newsletter on the Affordable Care Act.

Resources: There are also several related stories written by Intuit’s Mike D’Avolio about the Affordable Care Act. In addition to the stories below, be sure to review Intuit’s own webpage on the Affordable Care Act.

Friday, November 29, 2013

Exercise the food away!!

This week marks the start of the annual eat-too-much and move-too-little holiday season, with its attendant declining health and surging regrets. But a well-timed new study suggests that a daily bout of exercise should erase or lessen many of the injurious effects, even if you otherwise lounge all day on the couch and load up on pie.

To undertake this valuable experiment, which was published online in The Journal of Physiology, scientists at the University of Bath in England rounded up a group of 26 healthy young men. All exercised regularly. None were obese. Baseline health assessments, including biopsies of fat tissue, confirmed that each had normal metabolisms and blood sugar control, with no symptoms of incipient diabetes.

The scientists then asked their volunteers to impair their laudable health by doing a lot of sitting and gorging themselves.

Energy surplus is the technical name for those occasions when people consume more energy, in the form of calories, than they burn. If unchecked, energy surplus contributes, as we all know, to a variety of poor health outcomes, including insulin resistance — often the first step toward diabetes — and other metabolic problems.

Overeating and inactivity can each, on its own, produce an energy surplus. Together, their ill effects are exacerbated, often in a very short period of time. Earlier studies have found that even a few days of inactivity and overeating spark detrimental changes in previously healthy bodies.

Some of these experiments have also concluded that exercise blunts the ill effects of these behaviors, in large part, it has been assumed, by reducing the energy surplus. It burns some of the excess calories. But a few scientists have suspected that exercise might do more; it might have physiological effects that extend beyond just incinerating surplus energy.

To test that possibility, of course, it would be necessary to maintain an energy surplus, even with exercise. So that is what the University of Bath researchers decided to do.

Their method was simple. They randomly divided their volunteers into two groups, one of which was assigned to run every day at a moderately intense pace on a treadmill for 45 minutes. The other group did not exercise.

Meanwhile, the men in both groups were told to generally stop moving so much, decreasing the number of steps that they took each day from more than 10,000 on average to fewer than 4,000, as gauged by pedometers. The exercising group’s treadmill workouts were not included in their step counts. Except when they were running, they were as inactive as the other group.

Both groups also were directed to start substantially overeating. The group that was not exercising increased their daily caloric intake by 50 percent, compared with what it had been before, while the exercising group consumed almost 75 percent more calories than previously, with the additional 25 percent replacing the energy burned during training.

Over all, the two groups’ net daily energy surplus was the same.

The experiment continued for seven days. Then both groups returned to the lab for additional testing, including new insulin measurements and another biopsy of fat tissue.

The results were striking. After only a week, the young men who had not exercised displayed a significant and unhealthy decline in their blood sugar control, and, equally worrying, their biopsied fat cells seemed to have developed a malicious streak. Those cells, examined using sophisticated genetic testing techniques, were now overexpressing various genes that may contribute to unhealthy metabolic changes and underexpressing other genes potentially important for a well-functioning metabolism.

But the volunteers who had exercised once a day, despite comparable energy surpluses, were not similarly afflicted. Their blood sugar control remained robust, and their fat cells exhibited far fewer of the potentially undesirable alterations in gene expression than among the sedentary men.

“Exercise seemed to completely cancel out many of the changes induced by overfeeding and reduced activity,” said Dylan Thompson, a professor of health sciences at the University of Bath and senior author of the study. And where it did not countermand the impacts, he continued, it “softened” them, leaving the exercise group “better off than the nonexercise group,” despite engaging in equivalently insalubrious behavior.

From a scientific standpoint, this finding intimates that the metabolic effects of overeating and inactivity are multifaceted, Dr. Thompson said, with an energy surplus sparking genetic as well as other physiological changes. But just how exercise countermands those effects is impossible to say based on the new experiment, he added. Differences in how each group’s metabolism utilized fats and carbohydrates could play a role, he said, as could the release of certain molecules from exercising muscles, which only occurred among the men who ran.

Of more pressing interest, though, is the study’s practical message that “if you are facing a period of overconsumption and inactivity” — also known as the holidays — “a daily bout of exercise will prevent many of the negative changes, at least in the short term,” Dr. Thompson said. Of course, his study involved young, fit men and a relatively prolonged period of exercise. But the findings likely apply, he said, to other groups, like older adults and women, and perhaps to lesser amounts of training. That’s a possibility worth embracing as the pie servings accumulate.

Tuesday, November 19, 2013

Th $500,000 Tax Break That's Disappearing by Year-End

The $500,000 Tax Break That's Disappearing By Year-End

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Congress extended bonus depreciation and more robust Section 179 expensing through year-end 2013 as part of last January’s fiscal cliff deal, and now as the deadline is approaching, small business owners are looking anew at capital purchases. If you’re on the border line of whether you’re going to make some capital asset acquisition this year or next, you might want to accelerate it into this year.
“Especially this year if there’s a major purchase, it makes sense to do it,” says Jennifer Prosperino, a CPA and tax principal with Berdon LLP in New York City. “With the uncertainty, why take your chances?”
Also, the additional deduction is especially valuable to those facing the new higher tax rates for 2013, including the Medicare surtax on wages and self-employment income, notes Mark Nash, a Dallas-based partner in PwC’s Private Company Services practice.
Under the law now, bonus depreciation ends Dec. 31, and Sec. 179 becomes way less powerful as of Jan. 1. The dollar limits for Sec. 179 expenses is scheduled to drop on Jan. 1 to $25,000 with a $200,000 investment ceiling (from $500,000 today, with a $2.5 million investment ceiling).
So you’re looking at a known $500,000 tax break for 2013 versus an unknown 2014 tax break.
That’s the sales pitch Jeff Connally, chief executive of IT service provider CMIT Solutions, says his franchise partners are using in their year-end sales pitches to small businesses. It coincides with another reason small businesses might need to upgrade their computer systems—Microsoft MSFT -1.24% has announced it will end support for its Windows XP operating system next spring. And off-the-shelf computer software is specifically included in the definition of property that counts for the enhanced deduction through 2013. “Forward thinking clients are making the transition now; why not capture a known tax advantage?” Connally says.
One client, James Caruolo, just inked a $15,000 purchase of computer hardware and software for his 7-person law firm in Warwick, R.I. “The fact that we could expense that out 100% this year was a huge selling point,” Caruolo says. “We see the advantage this year; we’re going to take it.”
Does it make sense to accelerate purchases that might be deductible next year? Generally if you have the income this year to offset, it’s better to take the deduction now. “If there’s room this year, you might as well take it,” Prosperino says, adding that you never know what expenses might come up next year.
Here are some details. Under Sec. 179, small business owners (that includes a self-employed consultant) can deduct the entire cost (100%) of up to $500,000 of new or used computer equipment, vehicles, furniture—most depreciable assets that have less than a 20-year life.
With bonus depreciation, a company can deduct half the cost of new capital purchases in the first year. It can still be more valuable than the Sec. 179 break because the Sec. 179 deduction is limited to business taxable income with any excess carried forward. But if you’re actively involved in running a business, you can not only claim losses generated by 50% bonus depreciation against other income but can also carry any still unused losses back for two years and get a refund check from Uncle Sam.
What’s up for next year? “It’s pretty clear that Congress won’t extend these breaks by the end of the year, and next year we could end up with a year like 2012 where we went the whole year before they were renewed,” says Mark Luscombe, a federal tax analyst for CCH, a Wolters Kluwer Wolters Kluwer business.
Keep an eye on Congress. There are bills on the table that would to extend 50% bonus depreciation for three years –and one that would make it applicable to “used” dairy producing calves and cows.