Provision in New Tax Bill May Benefit Dealers
WASHINGTON, D.C. — Congress recently passed the “Protecting Americans from Tax Hikes Act of 2015,” a $622 billion tax bill that will allow dealers and their customers to expense a larger portion of business equipment purchases, according to a release from the National Automobile Dealer Association. The NADA said the provisions included in the Act will interest people purchasing passenger automobiles and trucks for business purposes, reported F&I and Showroom.
A provision in the act will grant dealers an additional $8,000 in first year-depreciation for certain business-related vehicles purchased in 2015. However, to use the provision in 2015, dealers must purchase qualifying vehicles before Dec. 31, 2015. The additional $8,000 continues into 2016 and 2017 but will be gradually phased out starting in 2018, according to the NADA.
The legislation has received strong support from the NADA and American Truck Dealers and has been signed by President Barack Obama.
The Act will also permanently extend and modify the limitations and treatment of certain real property as Sec. 179 deductions. The current $25,000 and $200,000 expensing limitation and phase-out amounts will be increased to $500,000 and $2 million, respectively, and will be indexed for inflation starting in 2016.
The current $250,000 expensing limitation for qualified real property will also be eliminated in 2016, according to the NADA. Furthermore, air conditioning and heating units placed in service in tax years beginning after 2015 will be eligible for expensing.
The act will also increase the amount of unused AMT credits that may be claimed in lieu of bonus depreciation starting in 2016. Bonus depreciation for property placed in service during 2015-2017 will be set at 50 percent, 40 percent in 2018 and 30 percent in 2019. Tax payers will continue to be able to choose to use AMT credits in lieu of bonus depreciation under special rules for property placed in service during 2015, according to the NADA. Qualified improvement property will now also be included as bonus depreciation.
The NADA encourages dealers to consult their tax advisor to determine the best way to maximize potential tax savings.
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