Congress Extends Bonus Depreciation Program

Fleets will be permitted to write off a sizable portion of the cost of equipment purchases from their 2013 tax returns thanks to a provision in the Congressional end-of-year fiscal agreement.

Included in the much-ballyhooed tax deal, which addressed a series of tax and spending cuts, is an extension of the so-called “bonus depreciation” tax write-offs that expired on Dec. 31. Bonus depreciation allows equipment purchasers to write off one half of the cost of new equipment in a single tax year.

“We’re optimistic that it’s going to help,” said Dave Thompson, president of TEC Equipment Inc., of Portland, Ore. TEC sells a mix of medium- and heavy-duty trucks.

Thompson said sales held steady the last two quarters at TEC dealerships in California, Nevada, Oregon and Washington but that “not everybody was prepared to buy” due to the economic uncertainty.

“Now they might,” Thompson said. “That depreciation will be a bonus; 100% is better, but 50% is pretty nice.”

TEC sells Volvo and Mack Trucks as well as Hino and Isuzu medium-duty trucks and GMC light-duty commercial trucks. It also has truck rental and leasing businesses, so, under the new tax bill, Thompson can also deduct 50% of the purchase price of new trucks he buys for that side of his firm.

Normally, depreciation write-offs are stretched over several tax years as a new asset deteriorates with age.

However, to help the manufacturing sector recover from the recession, a bonus depreciation program was created in 2010. Under it, in the 2011 tax year, equipment buyers could write off 100% of their purchase cost that year.

In 2012, the write-off dropped to 50% of the purchase cost and the program was to expire at the end of that year.

But keeping the 50% write-off is expected to help spur truck sales this year because the tax break “takes some of the sting” out of the higher cost of more fuel-efficient trucks, said Richard Witcher, chairman of American Truck Dealers and CEO of Minuteman Trucks, a light- and medium-duty truck dealership in Walpole, Mass.

© 2013, Transport Topics Publishing Group. All rights reserved.

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