Bonus Depreciation

by Kenneth Hoffman in ,

Don't automatically take the 100% bonus depreciation, the Section 179 writeoff or even the 50% bonus depreciation. Work through the numbers.

Taking a big deduction this year could leave you with no future deductions and that will cost you if you're in a higher bracket in the future. The self-employment tax (for sole proprietorships and partners) can also be a factor. Deductions will save the self-employment tax, but the deduction is wasted once your self-employment income drops below zero.

Additionally, those depreciation deductions will have to be recaptured if you sell the asset or your business in an asset sale. While the only way to get a good answer is to work through the numbers, a red flag should go up if the depreciation or Sec. 179 deduction forces your business income to go negative.

If you have any questions about this topic, tax law changes, business tips, or how to become a client, please call us at 954-591-8290 or use our Contact form.