Expiring Tax Breaks for Your Business

As the end of 2011 approaches, a slate of business tax breaks are scheduled to expire. Their demise – or renewal – may ease your year-end tax planning.

These tax-savers are scheduled for extinction at year-end, so take advantage while you can.

Legislation enacted last year included some very favorable, but very temporary, business tax changes. The best of the bunch are scheduled to expire at the end of this year unless Congress acts. These are the breaks.

100% First-Year Bonus Depreciation

For qualifying new (not used) assets that are put to use in your business by Dec. 31, 2011, you can claim 100% first-year bonus depreciation. This translates to deducting the entire cost in year one. There's no dollar limit on this deal, and even the largest businesses are eligible. If your business adds enough new stuff to generate an overall tax loss for the year, you can carry the loss back to 2009 and 2010 and recover some or all of the federal income taxes paid for those years.

Therefore, if you need assets buy them before the end of the year.

New passenger cars and light trucks are subject to the first-year depreciation allowances with some caps. Specifically, for new light trucks and vans used 100% for business, the maximum first-year depreciation deduction is increased to $11,260. For new passenger autos used 100% for business, the maximum write-off is $11,060.

Therefore, if you need a new business van or car buy before the end of the year.

However, If you buy a new "heavy" SUV, pickup or van (one with a gross vehicle weight rating, or GVWR, in excess of 6,000 pounds), you can deduct the entire business-use percentage of the vehicle's cost on this year's return — assuming the business-use percentage (based on mileage) exceeds 50% up to $25,000.

Therefore, if you need a big luxury SUV buy before the end of the year.

$500,000 Section 179 Deduction

For tax years beginning in 2011, the maximum first-year Section 179 depreciation deduction is $500,000. This translates to being able to deduct the entire cost of up to $500,000 of assets in the first year. Even better, the Section 179 break is available for both new and used equipment and software. However, unlike first-year bonus depreciation, you cannot claim Section 179 deductions that will create or increase an overall business tax loss for the year.

Therefore, if you need used equipment buy before the end of the year.

For tax years beginning in 2011 only, your business can claim up to $250,000 of Section 179 deductions for qualified real property additions.

Commercial property owners can for the first time ever write off capital improvements, rather than depreciating them.

Therefore, if you need capital improvements on your nonresidential property do before the end of the year.

Congress is notorious for enacting tax legislation at the last minute or even in the following year and making retroactive. Hopefully, they will extend these tax cuts.

Remember, cash flow is king. Do not spend money just to get a tax break.

Therefore, if you need to spend the money, do it this year to take full advantage of the tax savings

Wishing you many happy returns,