Income Tax Preparation Tips: Tempe, Chandler, Glendale, Paradise Valley, AZ

Section 179 fast write off of furniture, fixtures and equipment depreciation will change from $25,000 to $500,000 for 2014 By Jeffrey Brooks, CPA, CFP, MBA for JBrooks Wealth Advisors, PC, a Professional CPA and CFP Firm  jeff@jbrookswa.com  602-292-2009  Please consult with your professional tax CPA regarding your specific circumstances!

 

It is my opinion that there is a 100% chance that businesses will be able to write off up to $500,000 of fixed assets property also known as furniture, fixtures and equipment.

 

The House passed H.Res 766 on December 3 and the Senate passed the bill on December 16.

The President has agreed to sign the bill to be effective for all of 2014.

 On passenger vehicles over 6000 pounds up to $25,000 can be written off IF the vehicle is 100% used for business. Commuting is considered personal mileage.

 

When will taking Section 179 be a bad idea:

 

  1.  When regular depreciation called MACRS method allows you to create a larger loss. Your CPA has to run the numbers!
  2.  When you are in a lower marginal tax bracket this year but expect to be in a higher marginal tax bracket next year.
  3. When your businesses net income before depreciation is less than the amount of Section 179 you want to take.
  4. For example, if your business had a $50,000 tax profit and you purchased $100,000 of furniture, fixtures and equipment, you could only deduct up to the $50,000 tax profit.
  5. Another example is if you plan on selling your business as an asset sale is the following year. Your business has a profit of $400,000 before using Section 179 depreciation. If you use $400,000 of your purchases for the business as section 179 the result is zero tax cost basis. The buyer is going to want to assign a large portion of the purchase price to furniture, fixtures and equipment.  If $350,000 is allocated by the buyer to furniture, fixtures and equipment, you and your business will have to recognize $350,000 of ORDINARY income taxed at as high as 46% combined federal and AZ. This leaves you with just with 54% of the $350,000! Ouch!!
  6.  However, most businesses and their owners can save thousands of dollars!!  If your business taxable income was $400,000 and you bought $400,000 of property eligible for Section 179, you will not have to pay any income tax on the profits of your business.
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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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JBrooks Wealth Advisors, PC.

Certified Public Accountant
Address: 4647 N 32nd Street, Suite B245
Phoenix, Arizona 85018
Phone: 602-292-2009
Email: jeff@jbrookswa.com