I
thought it might be nice to publish a summary of the 2012 tax depreciation
limits for accounting and finance personnel to be able to reference. If
these limits don't particularly excite you, please forward to those tasked with
knowing such things.
Below are the 2012
tax depreciation limits for Section 179 and bonus depreciation, since
this changes year to year. The American Taxpayer Relief Act of 2012
extended the Section 179 amounts for the 2012 and 2013 tax year. The 50%
bonus depreciation was also extended to the 2013 calendar year.
FEDERAL TAX
1. Section
179 for 2012 tax year (see below) - Maximum Sec. 179
deduction $500,000. Investment limit $2,000,000.
(If more than $2M of fixed assets additions of qualifying Sec. 179
assets, the Sec. 179 deduction phases out dollar-for-dollar, e.g., if there
is $2,000,001 in additions, the Sec. 179 is reduced to $499,999 – Sec. 179 is
completely phased out when total additions exceed $2.5M). Most common
non-qualifying Sec. 179 assets are Leasehold Improvements (with exceptions).
2. 50% Additional
First Year Bonus Depreciation – Asset must be new. The bonus
depreciation was 100% for the 2011 calendar year. (For
example, if you have a 6/30/12 FYE client, 100% bonus depreciation will apply
for 7/1/11 – 12/31/11, and 50% bonus depreciation will apply for 1/1/12 –
6/30/12).
CALIFORNIA – California never conforms
to federal.
1. Section
179 – Maximum Sec. 179 deduction $25,000. Investment
limit $200,000. (Same dollar-for-dollar phase out applies –
at $225k new additions, Sec. 179 is completely phased out).
2. No
bonus depreciation allowed.
TAX YEARS
The basic rule for tax
years – it is determined by when the fiscal year starts.
The 2012 tax year for
Section 179 is applicable for 12/31/12, 1/31/13, 2/28/13, 3/31/13, 4/30/13,
5/31/13, 6/30/13, 7/31/13, 8/31/13, 9/30/13, 10/31/13, and 11/30/13 clients.
COMMON ASSET LIVES
(BNA)
1. 3
year SL – off-the-shelf software
2. 5
year MC200 – cars & trucks (see note below for limitations), computers,
machinery and equipment
3. 7
year MC200 – furniture, phones
4. 15
year MC150 – land improvements (parking lot, fencing, sidewalks)
5. 27.5
year SL – Residential Real Property
6. 39
year SL – Commercial Real Property (including leasehold improvements that are
structural and affixed) – certain LHI can utilize a shorter 15-year life for
federal if certain criteria are met – please ask if this applies to your
client.
NOTE ON CARS & TRUCKS
(SEE ATTACHMENT)
1. Most
cars and trucks are limited to the amount of depreciation (including Sec. 179
and bonus depreciation) you can take each year. The code for listed
property in BNA is “AL.” For 2012, autos are limited to $3,160 depreciation
in the first year. If bonus depreciation is taken (auto needs to be new),
the first year depreciation limit is increased to $11,160.
2. For
trucks having gross vehicle weight rating >6,000 lbs. and bed length >6
feet – can take Sec. 179 for entire cost – refer to Table I in
the attached file
3. For
(a) SUVs >6,000 lbs., (b) vans >6,000 lbs., and (c) trucks >6,000 lbs.
with bed length < 6 feet – Sec. 179 is limited to $25,000 – refer to Table
II - IV in attached file
SECTION 179 LIMIT
& MID-QUARTER RULES
If Sec. 179 is being
limited, and you are trying to figure out which assets to apply the Sec. 179
and which assets to not, the basic steps to take are:
1. First,
choose all the assets with the longer class life (e.g., choose
the 7-year asset vs. 5-year).
2. Second,
choose the asset closer to year end (e.g., choose the asset purchased on 12/31
vs. the asset purchased on 1/1).
