We have been in a recession for years. For many years now the government has been trying to help businesses last. The Bush years and the first years of the Obama administration produced many helpful laws. But now the (Congressional) worms have turned. Some members of Congress seem to want to end it all (the tax breaks). Some want the tax breaks to continue. Some don’t seem to know what they want. Their ability to act seems hopeless. But what we have before us are sunsets. Not the pretty kind. When these helpful laws were passed, they all had time limits. A number of these are finished as of December 31, 2011; most of the rest on December 31, 2012. The most important of the expiring provisions in 2011 are the depreciation deductions.

In my last article I mentioned that new vehicles weighing more than 6,000 pounds could be written off in one year. This amazing feature will end on December 31, 2011. As of now, the depreciation of those vehicles for 2012 will be 50% of the purchase price plus 20% of the remaining 50% (a total of 60%). Regular new autos weighing less than 6,000 pounds have a restricted maximum deduction of $11,060 (for 100% business use), but the deduction should not change for 2012. $8,000 of the regular auto depreciation would be eliminated after 12/31/12. The $8,000 figure is even now not available for used autos.

Most of the rest of long-term assets (personal property with expected use of more than one year) can be written off in full if purchased new in 2011, but are subject to the 50% rule in 2012.

Taxpayers can also make use of expensing assets under Section 179. The write off remains 100% but with certain differences from the above depreciation rules.

First, used equipment qualifies under this section.

Second, there is a limit of $500,000 of equipment that qualifies, but it is reduced dollar for dollar as purchases of equipment exceed $2,000,000.

Third, the deduction is limited to the profit of the company, though it can be carried forward to future years (not backwards). For 2012, the $500,000 limit will be reduced to $125,000; the maximum dollar of assets is reduced from $2,000,000 to $500,000.

Also, for 2011, up to $250,000 in leasehold improvements on a building more than three-years-old can be written off under Section 179, otherwise the taxpayer could be looking at a 39-year period for depreciation. The special problem that arises here is that any amount not deducted in 2011 but carried forward will no longer qualify as Section 179, but rather must be depreciated over the 39 years. What fun! ???

Of course, Congress could get together and extend the depreciation rules because both parties seem to want to help business at this time. On the other hand, one senator can decide to snag the whole thing. These rules pertaining to a 100% deduction are good until December 31st; anything after that is at risk.