Lowering small business tax liability by deducting depreciation
January 12, 2012
It's that time of year when the dust has settled from New Year's festivities and small businesses are getting back to the grind after the holiday season. In addition to the promise of a new start and the impetus to make resolutions a reality, January also has a less exciting aspect - the onset of tax season.
However, as the Seattle Post-Intelligencer notes, this year, small businesses looking to lower their tax liability can use the first-year depreciation
deduction to offset the full cost of qualified fixed assets
placed into service between September 8, 2010, and December 31, 2011. Depreciation can be reported using Form 4562, Depreciation and Amortization
It's also important to note that small enterprises can deduct up to 50 percent of business expenses related to meals and entertainment. Receipts must be produced to substantiate any claims, underscoring how vital it is to keep good records of expenditures.
Although the 100 percent bonus depreciation rate is no longer available, 2012 sees a 50 percent write-off which is expected to still act as a powerful incentive for American organizations, which spend in excess of 1.2 trillion per year on fixed assets, according to figures from the Equipment Leasing and Finance Association.