LAS VEGAS – Expiring federal tax laws could create an increasingly difficult financial environment for equipment dealers as bonus depreciation and state tax exemptions phase out.
The expiration of two tax benefits within the next three years under the Tax Cuts and Jobs Act will increase the financial pressure on equipment dealers, Roman Basi, president of the Center for Financial, Legal & Tax Planning, said during the 2024 AED Summit in Las Vegas on Jan. 16.
“It has allowed us to write off a large percentage of an eligible asset in the year it was purchased, so now we’re going to where we can only bonus depreciate 80% of the asset’s value,” Basi said.
The percentage of bonus depreciation dealers can write off will decline by 20% every year until it hits zero in 2027, according to the Internal Revenue Service. Meanwhile, the federal estate tax exemption under the act will expire in 2026.
Section 179 of the tax code, which is the primary form of depreciation that allows businesses to immediately depreciate equipment, remains in effect and provides another means of equipment depreciation for business owners, Basi said.
“Section 179 isn’t going away, but a lot of these federal and state tax laws are expiring, or the brackets have increased,” he said. “We’re getting a lot of tax laws expiring and we’re not hearing any extensions of them.”
Changes in the federal estate tax law will also affect dealers or any asset owners who die after Jan. 1, 2026, when the federal estate tax exemption drops from $13.6 million, or $27.2 million for couples filing jointly, to $5 million.
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