19 December 2014 NEW TAX LAW IMPACTS DEPRECIATION FOR 2014 Highlights • Section 179 deduction is $500,000 for 2014 • 50% bonus depreciation extended until 31 December 2014 The Tax Increase Prevention Act of 2014 has been passed by Congress and signed by the President. This bill extended several tax provisions that are advantageous for John Deere customers. The tax provisions listed in the highlights are described in more detail below. Section 179 • The Section 179 deduction is $500,000 for tax years beginning in 2014. • A Section 179 deduction is available for both new and used equipment purchases. • The cap where this benefit begins to phase out is $2,000,000 for tax years beginning in 2014. This means that a customer who places into service qualifying assets with a value of less than $2,000,000 in 2014 will be able to expense the first $500,000 of such asset purchases. The remaining balance will be depreciated over normal depreciation periods using normal depreciation methods (including applicable bonus depreciation). If more than $2,000,000 of qualifying property is purchased in a year, the available Section 179 deduction is reduced $1 for each dollar of eligible property purchased over $2,000,000. • Qualifying assets include depreciable tangible personal property and certain computer software used in a trade or business. Generally equipment manufactured and sold by Deere would qualify as long as it is used in an active trade or business. Bonus Depreciation • For property purchased and placed in service during calendar 2014, the original user/purchaser will be allowed to take additional first year depreciation in the amount of 50% of the tax basis/cost . • This additional first year depreciation is not available on used equipment. However, major repairs/reconditioning of machines which are capitalized may qualify for the additional first year depreciation. • The tables below indicate the dramatic impact that bonus depreciation can have on a customer’s depreciation deduction. In these tables, the “Regular” column shows the tax depreciation using regular MACRS (with no bonus depreciation). The “50% Bonus” column is the tax depreciation using MACRS and including bonus depreciation. AGRICULTURAL EQUIPMENT EXAMPLE The depreciation on a $100,000 piece of equipment purchased in 2014 and used in the business of farming is shown below. This example assumes 7-year depreciation using 150% declining balance and the half-year convention. Regular 50% Bonus 2014 10,710 55,355 2015 19,130 9,565 2016 15,030 7,515 2017 12,250 6,125 2018 12,250 6,125 2019 12,250 6,125 2020 12,250 6,125 2021 6,130 3,065 CONSTRUCTION & FORESTRY EQUIPMENT EXAMPLE The depreciation on a $100,000 piece of construction equipment purchased in 2014 is shown below. This example assumes 5-year depreciation using 200% declining balance and the half-year convention. Regular 50% Bonus 2014 20,000 60,000 2015 32,000 16,000 2016 19,200 9,600 2017 11,520 5,760 2018 11,520 5,760 2019 5,760 2,880 TURF EQUIPMENT EXAMPLE The depreciation on $10,000 of turf equipment purchased in 2014 is shown below. This example assumes 5-year depreciation using 200% declining balance and the half-year convention. (Note that the actual depreciation method and life may vary.) Regular 50% Bonus 2014 2,000 6,000 2015 3,200 1,600 2016 1,920 960 2017 1,152 576 2018 1,152 576 2019 576 288 This document is provided for general information only. Deere does not provide tax advice and strongly recommends you consult with your tax advisor to see how these tax saving opportunities from Section 179 and bonus depreciation apply in your situation
Posted on: Mon, 22 Dec 2014 14:26:26 +0000
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