Section 179 Expensing and Bonus Depreciation Revised Down for 2012

In 2011, there was 100% bonus depreciation for qualified assets, which included almost any tangible fixed asset that was not real estate or listed property.  The most common listed property is a regular automobile. In 2012, the Section 179 threshold will be revised down to $125,000, indexed for inflation (i.e. actually $140,000) and phases out after $500,000 of assets are placed in service, indexed for inflation (i.e. actually $560,000).

Additionally, in 2012, bonus depreciation will be revised down to 50%, instead of 2011’s 100%. Bonus depreciation can be used to create a loss, but Section 179 can only be used to offset income. Any unused expense is carried forward rather than used to create a loss.  However, Georgia doesn’t recognize bonus depreciation, only Section 179.  Another significant difference between the two is that bonus depreciation is all or nothing in the current year, meaning you either take it on all eligible assets or none.  With Section 179, you have discretion on an asset by asset basis.  Consult your C.P.A. about which one is better for you.

Autos and other listed property are subject to more favorable depreciation for 2011 and 2012.  While you do not get 100% expensing, you can take an accelerated $8,000 in depreciation the first year compared to prior years.  For example, a car that normally would be depreciated at $3,000 per year can be depreciated $11,000 ($3,000 + $8,000) in the first year.  This is set to expire at the end of 2012.

At Henssler Financial we believe you should Live Ready, which includes taking advantage of tax deductions while they are available.  If you have questions regarding your tax planning, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or e-mail at experts@henssler.com.

Disclosures

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