Law Allows Faster Write-Off of Business Assets

Section 179 Expensing  Code Section 179 allows taxpayers to elect to treat the cost of Section 179 property as an expense deduction for the tax year in which the Section 179 property is placed in service, instead of having to capitalize the expense and recover the cost over several years. Generally, Section 179 property is acquired by purchase for use in the active conduct of a trade or business, and is generally either (i) tangible property to which accelerated cost recovery applies or (ii) computer software (to which depreciation applies) placed in service in tax years before 2013. The property must be used more than 50% for business.

The Sec 179 expense deduction was increased for tax years beginning in 2010 and 2011 so that a taxpayer can expense up to $500,000 (up from $250,000 under prior law) of qualifying property, which includes machinery, equipment and certain software placed in service during the year. For 2010 and 2011 the annual expensing limit is reduced by the cost of qualifying property that is placed into service during the year that exceeds a $2 million (was $800,000) investment limit. The maximum Sec.179 deduction is scheduled to go down to $139,000 for qualifying property placed in service in 2012, and the investment limit cap will be $5,600,000.

Certain Real Property Can Also Be Expensed  Certain real property is also eligible for Sec 179 expensing. For property placed in service in any tax year beginning in 2010 or 2011, the up-to-$500,000 deduction of property expensed can include up to $250,000 of qualified real property (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property).

Bonus Depreciation is Extended For qualifying assets purchased and placed in service from January 1 through September 8, 2010, trades or businesses are allowed to depreciate an additional 50% (100% for purchases after September 8, 2010 and through 2011) of the cost of the assets. The 50% rate returns for 2012 purchases.

Please call if you would like to discuss how these tax benefits may apply to your business situation.