Page 37 - ATR 1 2014 web

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Tax law changes reduce short-term depreciation

by steve brawner

Contributing Writer

Carriers that purchase assets in
2014 will pay more taxes in the short
run than they would have in 2013
because, under changes in tax law,
they’ll lose the ability to take advantage
of the bonus depreciation rules.
That’s according to Richard Bell,
president of Bell & Company, P.A. and
Pancho Espejo, the firm’s senior tax
manager.
Starting January 1 of this year, car-
riers and other companies are losing
the ability to take advantage of bonus
depreciation rules under Section 168 of
the U.S. tax code. Carriers previously
could deduct half the cost of a new
asset in the first year of ownership, in
addition to regular depreciation on the
remaining basis of the asset. But those
provisions have expired.
Prior to January 1 on a $130,000
tractor, which is a three-year asset for
tax purposes, carriers could deduct
$65,000 in bonus depreciation plus
$21,666.67 in regular depreciation
during that first year, for a total of
$86,666.67, or two-thirds of the cost of
the tractor. By the time year two ended,
a carrier would have taken a total of
$115,555.56 in depreciation, leaving a
tax basis value of only $14,444.44.
Now carriers can deduct only
a third of the cost of the asset, or
$43,333.33, that first year. For a carrier
in the 40 percent tax bracket, the loss
of that one-third in depreciation will
mean an extra $17,333.20 in taxes in
year one.
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arKansas trucKing report | issue 1 2014 37