Well I guess it's a start. When the Section 179 depreciation program reverted to older levels of just $25,000 per year, there was a lot of talk that Congress would get moving on the topic soon. Now here we are on Dec. 8 with a House-approved measure restoring the higher $500,000 maximum deduction for this tax year.
Last-minute equipment purchases have been part of ag for a long time. In the old days - before Section 179 - the idea was to look at income and decide if investing in some iron might not reduce the tax bill. With the depreciation provisions restored, you can knock down your tax bill with the purchase of equipment for this tax year.
Of course, you have to take possession of the machine before year end to claim the deduction.
The House calls HR 5771 the Tax Increase Prevention Bill, and it includes a lot of other tax extenders that have been languishing on lawmakers' desks for some time. The action, however, just extends this provision for another year - not permanently. Great for 2014 but gives you no ability to plan purchases for next year.
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The Section 179 expensing provision has been a boon to capital investment in more than agriculture, allowing farmers, contractors, computer firms and a host of other businesses to upgrade their systems to improve productivity and enhance efficiency. The stall in the program - with the drop back to $25,000 - might be another crippling factor in equipment sales (beyond lower crop prices) for 2014 and beyond.
I realize a lot of other factors weigh in on your business decisions when it comes to upgrading equipment, but the Section 179 expense provision was a helper in that process. Odds are good that the Senate will take up the measure and pass it as soon as Wednesday. Congress is nearing the end of the session and the start of the holiday break.
Hopefully the Senate will clear this bill - it passed in the House by a vote of 378-46 - showing bipartisan support for the measure. Chances are good that if it passes by a wide margin in the Senate as well, President Obama will have to sign it.
For next year's Republican majority Congress, perhaps one agenda item would be to get provisions like Section 179 locked in permanently. Even if the levels are lower (clearly $25,000 is not enough) they'll provide a greater tax incentive for capital investment for the future. And frankly that's a good investment.
Got thoughts on the Senate measure? Send a note to your Senator this week - you can track him/her down at senate.gov.