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NEW YORK (AP) a¿¿ Small businesses are in limbo as they wait for Congress to make decisions that could save them a lot of money.
Bills in Congress would extend tax deductions widely used by small businesses making equipment or property purchases. One, known as the Section 179 deduction, has shrunk to a maximum $25,000 this year from $500,000 in 2013. Another, called bonus depreciation, expired at the end of last year.
The deductions are a big deal for small companies, saving them thousands or even millions of dollars on capital investments. But because Congress decides every year how big the deductions will be, owners can't plan their equipment budgets until lawmakers vote. And in recent years, worried about the ballooning federal deficit, Congress has put off those votes, sometimes until late in the year.
The annual uncertainty hurts small businesses looking for a break when their combined federal and state tax rates run as high as 40 percent, says Doug Bekker, a certified public accountant with the firm BDO in Grand Rapids, Mich. They don't know if they should make the purchase in the current year or defer it. And as the economy gets stronger and businesses are more profitable, they're concerned about tax bills.
"If you talk to the typical small business out there, there's a very high level of frustration," Bekker says.
The Section 179 deduction, named for part of the U.S. tax code, allows small businesses to deduct up-front the cost of equipment like vehicles, computers, furniture and manufacturing machines rather than depreciate them over a period of years. The deduction fell to $25,000 for 2014 because Congress hasn't approved a higher amount.
Many small businesses rely on the deduction. In a survey of more than 1,100 owners by the advocacy group National Small Business Association, 34 percent said they take advantage of it.