Here is a conversation I have had all to often the last 6 months:
"Tony, has there been any change on that 179 depreciation thing?"
"Not yet. We know it will at least be 25,000, and we are hoping something gets updated before the end of the year."
"Man! You keep telling me I need to plan.!.!.! How can I plan when we don't even know what the options are?"
I can't help but agree with my clients.
In my last post, I argued for the benefits to business owners, and individuals, to include tax planning in their financial plans. For many of my clients, and small business owners in general, one major tool in their tax planning arsenal is first year depreciation, referred to by tax nerds like myself as 179 depreciation (tax nerd as used here is an endearing term). Unfortunately, for the past two years lawmakers have left us guessing what this law would be!
According to recent news releases, it appears that Congress is finally getting ready to sign updated legislation before the coming weekend that will clarify what the law will be for tax year 2015. (I will post an update after the dust settles.) I'm very excited by the projection that the limit is being increased significantly. The only problem is that for the second year in a row Congress is passing a law after the tax year has basically closed. It's would be impossible for someone to wait for lawmakers to pass this law, and then turn around in the last two weeks of the year to purchase $500,000 of equipment. It's like letting the cart drive the horse....
Before this post begins to sound like a big gripe session, let me clear up my purpose. I believe that if Washington had been ahead of this game they would find the law would have encouraged more purchasing than the effect that will come from making a law and putting a retroactive date on it. In fact, it could be argued that they the law hasn't spurned any new growth, it is just rewarding those who happened to have already made eligible purchases. We are operating in an unclear tax law world, and whenever things are unclear it breeds inefficiencies and uncertainty.
So my formal request to Congress is to clear this up! Please deliver businesses a Christmas gift. Please tell us what these depreciation limits will be for the next 5 years! I won't even try to get you to commit to anything farther out. Just 5 years! Please, we could use the clear leadership and direction. Let's take Stephen Covey's 2nd habit to heart, "Begin with the end in mind." Help us to see the end in this particular situation so we can more effectively plan.
For more information on 179 Deprecation tax laws click here.