The “Bonus Depreciation” allowance was extended through the end of 2013, affording businesses that purchase new equipment more working capital by allowing them to deduct a greater percentage of the purchase.
A company making a qualifying equipment purchase, according to Paul Mueller of the Loveland-based accounting firm Mueller and Associates, would typically be able to write off 20 percent of the cost.
Under the allowance, businesses will be able to write off 60 percent of the purchase, freeing up capital for other uses.
It is important to note that the allowance only applies to new equipment purchased, Mueller said.
The reason for this is that in addition to freeing up capital, the allowance is also meant to boost manufacturing by incentivizing companies to purchase equipment.
The fiscal cliff deal also extends through the end of 2013 the ability to write off the first $139,000 of equipment purchases and the research and development tax credit.