Despite the acrimony and brinksmanship, Congress eventually passed an extension of the payroll tax reductions in late December 2011, maintaining the 2% reduction in payroll taxes for workers and the self-employed. The relief is good for two months through February 2012. Negotiations are already underway between the House and Senate to find a way to extend payroll tax relief through 2012.

But the bill ultimately passed by Congress did not extend the Section 179 expense deduction or 100% bonus depreciation at the 2011 levels. Both provisions have returned to prior lower levels.

Section 179 Expense Deduction

The expense deduction has returned to $125,000 for 2012 and phases out dollar-for-dollar once purchases of depreciable property reach $500,000. The 179 expense deduction applies to horses, farm equipment, and other depreciable property used in a business and permits a horse owner or breeder to write-off up to $125,000 in assets purchased and placed in service in one’s horse business in 2012