Pub. 12 2013-2014 Issue 4

N e w J e r s e y C o a l i t i o n O f A u t o m o t i v e R e t a i l e r s W I N T E R 2 0 1 4 24 new jersey auto retailer Tax Trends For Motor Vehicle Dealerships By Robert J. Brown, CPA Two tax trends that are having a great impact on dealers this year are the expiration of Bonus Depreciation and the additional Net Investment Tax (NII). Dealers were able to take an additional depreciation deduction of 50% on certain new fixed assets & improvements that were put into service in tax year 2013. Now that this is no longer available, taking advantage of the new IRS Tangible Property Regulations becomes a priority. These regulations outline the ability to expense qualified items instead of having to capitalize them and writing them off over long periods of time. Starting with the year 2013, based on their adjusted gross income, individuals may be subject to the Unearned Income Medicare Contribution surtax of 3.8% on their net investment income. This surtax is also called the Net Investment Income Tax. This is a surtax in the sense that it is a tax responsibility in addition to the federal Income Tax. Tangible Property Regulations 1. General Information a. Final regulations were issued governing when taxpayers must capitalize and when they may deduct expenditures for acquiring, maintaining and repairing and replacing tangible property. b. Every business with at least some fixed assets must comply with these new rules for its first tax year beginning on or after January 1, 2014. c. Companion regulations, governing general asset accounts and disposition of depreciable property, were expected to be issued by the end of 2013, with the same effective date of Janu- ary 1, 2014. The IRS also plans to issue additional guidance regarding change-of-accounting procedures. d. The final regulations must be followed by all taxpayers starting in tax years beginning on or after January 1, 2014. Taxpayers are given the option to apply either the final or temporary regulations to tax years beginning after 2011 and before 2014. 2. Capital Expenditures - Regs. 1.263(a)-1 a. No deduction is allowed for (1) any amount paid for new buildings or for permanent improvements or betterments made to increase value of any property; or (2) any amount