Internal Revenue – Section 179
By Pierre Mouchette | Real Property Experts LLC
Did you know that most new business equipment can be depreciated over its useful life or expended immediately under Internal Revenue Code Section 179? Each 1040, whether Single or Joint, is limited to one maximum 179 expenses passed through K-1s from partnerships (1065), S-Corporations (1120S), or trusts (1041) limited at the 1040 level to the one maximum amount. A C-Corporation can deduct its own 179 expenses and what is claimed on the 1040s of the owners. This is one of the many ways C-Corporations can save thousands of dollars in taxes over S-Corporations.
The following is for informational purposes only. We are not engaging in the rendering of legal, accounting, or other professional (licensed) advice. If legal advice or further expert assistance is required, the applicable services of a licensed, qualified professional should be sought. The tax code is continuously changing. Please consult your professional.
What is the Section 179 deduction?
When your business purchases certain types of equipment, it will typically be able to write it off a little at a time through depreciation. As business owners, we would most likely prefer to write off the entire equipment purchase price in the year purchased, and maybe we might be able to purchase additional necessary equipment with the savings. Essentially, that is the whole idea behind Section 179, to motivate the economy to acquire more.
The Section 179 deduction has a ‘more than 50% business-use requirement.’ Meaning that the equipment must be used for business purposes more than 50% of the time to qualify. (Multiply the cost by the percentage of business use to obtain the dollar amount).
To qualify for the Section 179 tax deduction, the qualified items must be placed into service between January 1 and December 31. The Section 179 deduction is taken on an item-by-item basis, and you do not have to use the deduction on the item bought during the year if you do not wish to.
Limits of the Section 179 deduction.
Section 179 comes with a cap of $2,500,000
For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.