2014 Depreciation

Wondering how much the IRS might help you pay for it? If so, I have some information to share with you about depreciation & taxes.

For those who follow it, Bonus Depreciation expired at the end of last year (2013). Over the last few years, Congress and the President have consistently allowed that tax deduction in one form or another; but not this year. Yet…

So far, both the Congress and the Senate are considering a renewed Bonus depreciation law (House has already passed, Senate is in committee). They’re slightly different bills that would have to be reconciled before being sent to the President for signature. Some tax experts have said they believe Bonus Depreciation may yet pass for 2014, but only after the mid-term elections in November.

So where does that leave you? Remember, Bonus or Accelerated depreciation is simply a way of concentrating depreciation expense into one year rather than spreading it out. If you think your business is likely to continue into next year, you should know about what’s available.

Here are some examples I’ve been sharing with prospective airplane buyers:

Example 1: Buy a new plane in 2014 and Bonus Depreciation is not available:

If you take delivery in 2014, you may write off 5% of the purchase price against your 2014 income. THEN, you can write off 38% against your 2015 income. A total of 43% over two years.

Example 2: Bonus depreciation does pass and you took delivery of a 2014 airplane:

You can write off as much as 53% against 2014 income and 19% in 2015. A total of 72% in two years!

Example 3: You wait until 2015 and there’s no Bonus depreciation:

You’ll only be able to write off 20% of the purchase price in 2015 and spread the rest over the subsequent years.

Source: Daniel Cheung CPA of www.aviationtaxconsultants.com