Congress is considering legislation to make Section 168 Bonus Depreciation and Section 179 Depreciation Allowance permanent. Insiders believe this matter will be shelved until after November 2014 elections.
168 is currently expired for 2014. Congress may reinstate it and make it retroactive to 1-1-14. 168 was enacted following “9-11” as an economic stimulus / accelerated depreciation tool available to organizations purchasing new “qualified property”; no used equipment, nothing with a depreciation schedule longer than 20 years (i.e. certain real estate) and no quantity or dollar ceiling.
1031 Exchanges are a valuable substitution for the expired Section 168, when an organization is replacing or upgrading to new, like-kind assets. If 168 is reenacted, LKEs remain valuable when an organization purchases used assets.
179 is currently available as an accelerated depreciation tool when an organization purchases new or used equipment including off-the-shelf software; no quantity limit, but only available to a maximum of $25k and to organizations not exceeding $200k in total capital spending. Above the $200k threshold, 179 availability is reduced dollar-for-dollar. Additionally, 179 may not drive a loss. Congress may permanently reinstate 179 at it’s former, higher limits ($500k allowance and $2MM capital spending ceiling) and make it retroactive to 1-1-14.
1031 Exchanges are highly beneficial to organizations surpassing 179 limits or unable to utilize 179 due to an NOL or loss carryforward, when replacing or upgrading to used or new like-kind assets.