Small Businesses Taxes Change Again In 2012

The only certain things in life may be death and taxes, but small business taxes keep on changing. Sometimes, this means more and bigger tax breaks. At other times, it means shrinking deductions and the disappearance of perks that have reached their expiration date. You’ll see some differences in the 2012 tax code that might affect your decisions for this year’s expenditures. Let’s take a look at some upcoming changes.

Through the end of 2011, you can purchase expensive business equipment and depreciate the entire cost immediately (up to $500,000). According to the Business Finance Store, this Section 179 deduction will be cut substantially in 2012 and reduced even further in subsequent years. The “bonus” depreciation amount you can take on top of the $500,000 will be cut in half in 2012 (down to 50% of the asset’s value). For 2011, the total available deduction using both the regular and bonus depreciation amounts is still $2 million.

Stock Up on Big Ticket Items

If you were planning to buy new equipment for your business anyway, this is an ideal time to do so from a tax break standpoint. The equipment has to be delivered/installed by year’s end to qualify. You can’t order it now, take delivery in January and still qualify for the accelerated depreciation benefit. Here are a few items that you might be thinking about purchasing:

  • New servers, computers, printers, or other technology upgrades
  • Manufacturing equipment
  • New office furniture

Don’t Overextend Your Business

The purpose of Section 179 was to free up capital for businesses to expand and begin hiring again. If that describes your company’s plan, this might be the right time to take advantage of the 2011 deductions. On the other hand, if you are struggling just to stay afloat, it makes more sense to explore cost cutting measures that don’t require such a big outlay of cash. When it comes to taxes, spending money unnecessarily just to get deductions usually doesn’t make sense. As always, one of the best ways you can invest your money is by hiring a knowledgeable business tax consultant to answer your questions

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