This is the time of year that could be filled with tax legislation impacting corporate tax strategies. The uncertainty makes planning difficult. Year-end planning should focus on tax advantages set to expire or decrease as of December 31st. As they may or may not be extended, the time to act is now.
The general approach to year-end planning includes the acceleration of deductions and the deferral of income. Maximizing tax advantages includes a review of both 2011 and 2012.
Last chance for 100 percent bonus depreciation. Without any legislative action, the 100 percent first year bonus depreciation allowance will generally not apply to any qualified property placed in service after December 31, 2011, as this attractive incentive drops to 50 percent in 2012.
Maximize the generous Section 179 expensing deduction. For tangible personal property placed in service in 2011, taxpayers can deduct as an expense up to $500,000, rather than depreciate over the useful life. Without any legislative action, this limitation will drop to $125,000 in 2012.
Take advantage of real property expensing. $250,000 of qualified real property including leasehold improvement, restaurant property, retail improvement can be deducted as expense. Without any legislative action, these properties revert to straight-line depreciation in 2012.
Accrue year-end bonuses. Certain bonuses accrued, but not paid by year-end, may still be deductible if: the employee does not own more than 50 percent of the corporation, the bonus is accrued 2011 and the bonus is paid by March 15, 2012.