For Chadwick Service Company customers who are property owners and are planning for major mechanical equipment purchases such as chillers, boilers, cooling towers, and other big ticket items, here are some of the 2014 depreciation considerations.
Companies are able to recover the cost of equipment purchases through depreciation expense, a non-cash expenditure that reduces taxable income without reducing cash flow. Depreciation expense can be claimed in a steady, annual manner over the useful life of the equipment, or it can be accelerated. Accelerated methods allow companies to front load depreciation expense in the year the equipment is purchased, which can aid in retaining capital as companies grow. These methods also reduce taxable income and are a commonly relied upon tax planning tool. However, the accelerated methods either expired or were drastically reduced at the end of 2013, leading to a planning dilemma in 2014.
Effective January 1, 2014, bonus depreciation, which allowed businesses to deduct 50% of the cost of certain types of new capital items in the first year, expired entirely. The Section 179 expensing election, which had a previous maximum deduction of $500,000 (on up to $2,000,000 of equipment purchases) was reduced to just $25,000.
These changes are significant as businesses will need to consider alternative tax planning procedures to implement. Muddying the waters is that an extenders bill is currently in play that could keep the accelerated methods around until January 1, 2016. It remains unclear if the bill would be retroactive to January 1, 2014, if passed, and the bill has not yet been called for a vote. It is also unclear if Section 179 would revert to its $500,000 max, or if it would be capped at $250,000.
Please contact Mike Sexton (email@example.com) or Eric Seidman (firstname.lastname@example.org) at Wouch, Maloney & Co., LLP (215-675-8364) for tax planning assistance and further information regarding accelerated depreciation methods.
Chadwick Service Company offers a wide range of service including plumbing, energy audits and benchmarking, preventative maintenance services, and plumbing repairs. You can find more about our services at http://www.chadwickservice.com/index.php/our-services/.