On January 1, H.R. 8, the American Taxpayer Relief Act of 2012, was enacted into law. The legislation stopped many automatic tax increases which were scheduled to go into effect immediately, temporarily averting the so-called budgetary “fiscal cliff” in Washington.
The automatic spending reductions of the fiscal cliff were not addressed in the bill, but will be revisited by the new Congress before the deadline in two months.
Among the many provisions of H.R. 8 was the reauthorization of the Work Opportunity Tax Credit (WOTC) through the end of 2013 (and retroactively covering 2012). These tax credits allow hoteliers to hire disabled and disadvantaged workers, youth, veterans, and other at-risk individuals. Generally the credit is equal to 40 percent of the first year of wages up to $6,000.
Also included in the legislation was the renewal of bonus depreciation, also known as section 179 expensing. This allows hoteliers to immediately take deductions on purchases of capital equipment rather than depreciate them over a period of time. The maximum deduction for 2012 and 2013 is $500,000, and the asset limit is $2 million. Also, 50 percent of what is spent for capital equipment can be expensed in the first year.