IRS Section 179 Tax Advantages Extended

Posted on Jun 15, 2010 in Jeff Nolte's Blog

Companies may accelerate equipment depreciation by writing off the cost of the equipment in the same year of purchase. Under IRS Code Section 179 depreciation provisions, small businesses can potentially deduct up to $250,000 of purchased equipment and software as soon as these items are put to work.

Here’s an example of how a $250,000 purchase breaks down…

Section 179 Write-Off Amount: $ 250,000
Cash Savings on Purchase: $87,500
(Assuming a 35% Tax Bracket)
Net Cost of Equipment: $ 162,500

Now here are a few things you need to know…

Government Programs: Economic Stimulus Act of 2008, American Recovery Act of 2009, HIRE Act of 2010

Qualifying Period: Equipment must be purchased and installed between January 1, 2010 and December 31, 2010.

Leasing and Financing Eligible: The obvious advantage to financing equipment and then taking the 179 Deduction is that you can deduct the full amount, without paying the full amount this year. The amount you save in taxes can actually exceed the payments, making this a very bottom-line friendly deduction.

C Corporations – These businesses cannot claim a Section 179 deduction that would create or increase a tax loss for the year. The deduction is limited to the amount of corporate taxable income before the deduction.

Sole Proprietorship, Partnership, LLC, or S Corporations – Section 179 deductions are passed through to the owners and written off on their personal Form 1040. Individuals can not claim Section 179 deductions that would create or increase an overall business tax loss on Form 1040.

Talk to your accountant. Then talk to us… We’ll help you get the most bang for your Section 179 bucks.