Recently, the Pennsylvania House passed HB 333 (E. Nelson), Section 179 expense deduction legislation. HB 333 would permit pass-through businesses to utilize the same tax strategies as a corporation by bringing Pennsylvania’s Section 179 tax law more in line with the Federal Internal Revenue Code. Section 179 allows taxpayers to deduct the cost of certain property as an expense when the property is placed in service.
For tax years beginning after 2017, the Tax Cut & Jobs Act (TCJA) increased the maximum Section 179 expense deduction from $500,000 to $1 million. The maximum amount of the deduction was indexed and now stands at $1,050,000. For Personal Income Tax purposes, Pennsylvania allows any generally accepted depreciation method, including Section 179. The maximum deduction is $25,000.
This disparity places small employers at a significant disadvantage when compared to large corporations, hampers new business from coming to Pennsylvania and discourages existing businesses from expanding. There is a need for parity when looking to address this issue, and that is what HB 333 would do, permit pass-through businesses to utilize the same tax benefits as a corporation. This legislation is now before the Senate Finance Committee.