As we enter the last quarter of the year, thoughts turn to year-end tax planning. One common year-end planning strategy is to review fixed asset purchases for the year and consider additional purchases by December 31, 2020. Everyone likes a tax deduction in the current year; however, this could be the year to consider another approach.
The 2020 tax year has a variety of factors to consider when determining whether a Section 179 depreciation deduction, bonus depreciation deduction, or the timing of the year-end asset purchases is the better choice for a business. From the impact of the COVID-19 pandemic on business operations to the suspected impact of the November elections on future tax policy, there are many factors which could create situations where saving the tax deduction for future years by delaying asset purchases until January 2021, or not accelerating the tax depreciation in 2020 on assets already purchased, is the most beneficial tax strategy. While no one can predict what 2021 holds, making an educated decision based on the specifics of your tax situation is the best way to proceed.
Discussions on possible election outcomes and timing of fixed asset purchases are important factors to consider in overall tax planning.
Contact your ACT client service representative with questions about the best approach for you and how it might impact your business, or email us at info@actcpas.com.
