Tax Laws of Business Income

Several business provisions in the tax law are available only through 2013.

For this reason, it may be prudent to plan to use them by the end of the year. They include:

  • Section 179 expensing of up to $500,000 of new or used equipment when total fixed asset additions do not exceed $2 million for the year
    •  Lesser expensing is available when fixed asset additions exceed $2 million but are less than $2.5 million
    •  No deduction is available when fixed asset additions equal or exceed $2.5 million
    •  A 50 percent bonus depreciation on new equipment
    • A 15-year rather than a 39-year cost recovery on qualified leasehold improvements and restaurant and retail assets
    •  Research and development credits
    •  The Work Opportunity Tax Credit

Mid-year and year-end planning may be especially important for Section 179 expensing, which is scheduled to drop from $500,000 in 2013 to $25,000 in 2014, and for bonus depreciation, which is scheduled to expire totally after year end.

Simplified home office deduction rules begin in 2013. In lieu of actual expenses, taxpayers may deduct annually $5 per square foot of office space, up to 300 square feet, for as much as $1,500 in deductions in computing deductible expenses for a home office. While simplifying record-keeping, a larger deduction might be computed on actual expenses. A home office deduction generally is allowed only when a portion of a home is used as the principal place of business and exclusively for business – not just as a convenience for bringing work home.

Robert A. Lenberg II, CPA, CMA


The technical information in this newsletter is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. Please be advised that, based on current IRS rules and standards, the information contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty assessed by the IRS.