The fate of several popular business tax breaks remains in flux—for now.
All year, business owners have been waiting to see whether Congress would extend some key business tax breaks that they have enjoyed the past few years. The Section 179 expensing limits, for example, were scheduled to fall to $25,000 for 2014 (from $500,000) unless Congress extended the higher expensing levels through 2014. Bonus depreciation—which allows companies to write off 50 percent of the cost of certain purchases in the first year—was scheduled to expire for 2014 unless Congress kept it alive.
But rifts in Congress have so far prevented the breaks from being extended.
The House passed a bill recently that would extend the business tax breaks along with several other tax breaks. President Obama, however, has threatened to veto the bill because it did not extend tax breaks aimed at low-income families, such as the earned income credit. (The White House has also been critical of bonus depreciation, because it is estimated to cost the government $287 billion over a decade with limited proof that it’s helped spur economic growth, according to The Hill.)
The Senate were expected to pass its own tax extenders proposal—but it was unclear as of Friday morning whether the tax breaks would pass by the time the lame duck Congress adjourns for the season over the weekend.
The last-minute wrangle over these popular tax breaks has left many business owners in a lurch all year because they haven’t known whether they can count on having those breaks for 2014—and still don't know.
Lisa Goodbee, owner of a Denver engineering firm, recently told The Wall Street Journal that even if Congress extends Section 179 expensing limits and bonus depreciation for 2014, it still leaves questions for 2015. The Section 179 equipment expensing deduction is “one of the few tax breaks that directly affects my decision-making,” she said, and has allowed her in recent years to make several large purchases for her business.
But she has reined in her spending for 2014 because of the uncertainty over whether the expensing limits would be raised for this year. She said Congress should work harder to give business owners more clarity over the tax breaks they will have available to them.
“As a small business, the most important thing you can do is to help us plan ahead,” she told WSJ.
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