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Averting the Fiscal Cliff

January 16, 2013



Averting the Fiscal Cliff

After much ado, the “Fiscal Cliff” has been averted, and the American Taxpayer Relief Act of 2012 (“ATRA” or “The Act”) has become a reality.  But while The Act addresses tax related issues relevant to 2012 and 2013, the spending cut issues are far from settled.


For Businesses –
Tax tools such as expanded section 179 limits and bonus depreciation have been very beneficial for businesses in terms of tax deferral, and their reduction and/or expiration are likely to bring unwelcome tax liabilities to those who have used these deferral methods over the last several years.  As tax rates increase for some in 2013, strategic use of these tools may help to manage tax liabilities, which may include accelerating income into 2012.

Business Tax Extenders provided in The Act include:
Section 179:  ATRA extends the $500,000 limit for fixed asset purchases (including off-the-shelf computer software) through the end of 2013.  The deduction begins to phase out dollar for dollar once total fixed assets placed in service exceed the $2,000,000 investment limit.  This extension allows businesses to take advantage of higher limits for both 2012 and 2013, as the dollar limit for 2012 was previously set at $125,000 with a $500,000 investment limit.  Section 179 applies to both new and used equipment purchases.