Expiring Tax Provisions Add to Uncertainty in the Business World in 2012March 12, 2012
Christine P. Gonzalez, CPA, MST
A number of key tax provisions have either expired or will soon expire. With a struggling economy and recent inaction by Congress resulting in failure to reach an agreement on reducing the budget deficit, this could only add to the uncertainty many businesses are facing in 2012.
Some of the most taxpayer favorable business tax incentives expired at the end of 2011, and others are expected to expire after 2012. Although Congress may retroactively reinstate some or all of these provisions, an agreement before the November election seems unlikely:
Bonus Depreciation – A special 100% bonus depreciation deduction was allowed for qualifying new (not used) assets acquired and placed into service in 2011. In 2012, the deduction is scaled back to 50%. Current tax law does not extend bonus depreciation beyond 2012.
Section 179 Expensing – In 2011, a Section 179 expensing deduction could be taken on qualified property up to $500,000. In 2012, the limit is dropped to $139,000. After 2012, the deduction is scheduled to revert to $25,000. Further, the $2 million investment ceiling in 2011 has been reduced to $560,000 for 2012.
Qualified Leasehold Property – A 15-year straight-line cost recovery and eligibility for Section 179 expensing was allowed for qualified leasehold improvements, qualified restaurant property and qualified retail improvements in 2011. Beginning in 2012, such properties will generally be depreciated straight-line over 39 years and are no longer eligible for Section 179 expensing.
Research and Development Credit – The 20% credit for excess qualified research expenses expired at the end of 2011.
Work Opportunity Tax Credit – A credit for employers who hire members of certain targeted groups was allowed, generally, to the extent of 40% of qualifying first-year wages up to $6,000 per employee. This credit expired at the end of 2011. An amended version of the credit is available in 2012, but only with respect to employers that hire qualified veterans.
- Enhanced Charitable Deductions – Expired enhanced charitable deductions include deductions for contributions of food inventory, book inventories to public schools and corporate contributions of computer equipment and technology to qualifying educational institutions and libraries.
These reduced, expired and expiring tax provisions have no doubt caused concern in the business world. Adding to that concern are future discussions of a tax policy overhaul that could meet the same level of Congressional gridlock and inaction we have seen recently. It is important for businesses to take advantage of these tax benefits while they’re still available. To help ensure future prosperity for your business, consult with a tax specialist to discuss opportunities for the 2011 tax-filing season and beyond.
Christine P. Gonzalez, CPA, is a director with BlumShapiro, the largest regional accounting, tax and business consulting firm based in New England, with offices in West Hartford, and Shelton, CT and Boston and Rockland, MA. The firm serves as business advisors for today’s leading companies, non-profit organizations and government entities, working to strategically tailor and consistently deliver tested solutions for unlocking an organization’s full potential. For more information about BlumShapiro, visit blumshapiro.com.