Uncertainty around future tax policies makes proactive tax planning more critical than ever. With key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) set to expire and evolving political dynamics, businesses and individuals must act now to maximize available benefits and safeguard their financial position.
Leverage Current Opportunities with Section 179 and Bonus Depreciation (168(k))
The TCJA introduced tax incentives like 100% bonus depreciation under Section 168(k) and enhanced expensing limits under Section 179, both designed to spur investment. As these provisions phase out, the window to optimize these advantages is closing fast.
Understanding Section 179 and Section 168(k): Current Opportunities
Section 179 Expensing
Section 179 allows businesses to deduct the full cost of qualifying property, such as equipment and software, in the year it is placed in service, offering flexibility to pick and choose assets. Benefits of Section 179 include:
- Custom Deduction Strategy: Elect deductions for specific assets rather than all eligible property.
- Limits for 2024: Deduction capped at $1.16 million, with phase-out starting at $2.89 million in total asset purchases.
Section 168(k) Bonus Depreciation
Bonus depreciation offers the chance to immediately expense a percentage of the cost of qualified property. However, its benefits are phasing out:
- 2024: Deduction reduced to 60%.
- 2025: Drops further to 40%.
- 2026 and Beyond: Fully eliminated by 2027.
By combining Section 179 and 168(k), businesses can strategically maximize deductions for capital investments before these favorable provisions disappear.
Why Immediate Action Matters
1. Maximize Current Benefits
The 60% bonus depreciation rate for 2024 still provides significant tax savings. Pairing it with Section 179 can reduce taxable income for both federal and state purposes, depending on state conformity.
2. Mitigate Political and Fiscal Uncertainty
With TCJA provisions expiring in 2025 and no guarantee of extensions, waiting to act risks losing tax advantages. Upcoming elections could also lead to sweeping changes, potentially raising tax burdens on individuals and businesses.
3. Prepare for Long-Term Tax Efficiency
Optimizing your tax strategy now ensures you are positioned to absorb future tax increases or take advantage of any extensions.
Strategic Tax Planning Tips
- Accelerate Purchases: Consider making capital investments in 2024 to lock in Section 179 and 168(k) benefits.
- Coordinate Deductions: Use Section 179 for selected high-value assets and apply bonus depreciation broadly to maximize overall savings.
- Review State Tax Rules: Many states decouple from federal depreciation rules. Ensure compliance and evaluate the impact on state-level taxes.
- Repair Cost Deductions: Identify and expense repairs to tangible personal property to complement reduced bonus depreciation benefits.
Secure Your Financial Future with Sequoia Investments
Don’t let uncertainty derail your tax strategy. By taking action now, you can leverage the remaining benefits of Section 179 and 168(k) to optimize your tax position and prepare for future changes. Contact us today to secure your tax savings and ensure your business is prepared for what’s ahead.
Act now—your financial future depends on it.
