|
Most new business equipment can be either depreciated over its
useful life or expensed immediately under Internal Revenue Code
Section 179. The maximum deduction is based on the following
schedule for the date in which the tax year begins. Each 1040,
whether Single or Joint, is limited to one maximum. 179 expenses
passed through via K-1s from partnerships (1065), S-corps (1120S),
or trusts (1041) are limited at the 1040 level to the one maximum
amount. A C corp is able to deduct its own 179 expenses in addition
to what is claimed on the 1040s of the owners. This is one of the
many ways in which C corps can save thousands of dollars in taxes
over S corps.
|
2002
|
$24,000 |
|
2003 |
$100,000 |
|
2004 |
$102,000 |
|
2005 |
$105,000 |
|
2006 |
$105,000 + COLA |
|
2007 |
$105,000 + COLA |
|
2008 |
$25,000 |
|
2009 |
$25,000 |
For 2004 through 2007, the annual amounts are to be adjusted for
inflation. Up until recently, the Section 179 election was only
allowed on originally filed tax returns. People who overlooked it
were not allowed to claim it on amended returns. This new law
allows the Section 179 expensing election to be claimed or revoked
on amended returns for 2003 through 2007.
Qualifying
Property
Generally, the types of business equipment that qualify for this
expensing election are the same kind that qualified for the
now-defunct Investment Tax Credit. Most movable assets qualify.
Permanent structures do not qualify. Business vehicles with a gross
vehicle weight over 6,000 pounds qualify for the full Sec. 179,
while lighter vehicles have a much lower dollar limit.
One of the most common questions I am still receiving is whether the
Section 179 expensing election is only available for the purchase of
brand new assets or whether things such as used vehicles qualify.
The answer is still the same. The asset just has to be new to you.
You can claim the deduction for items purchased from anyone other
than yourself or an entity controlled by you, such as a closely held
corporation.
As
of October 22, 2004, the maximum amount that can be claimed for SUVs
weighing between 6,000 and 14,000 pounds is $25,000. The remaining
$77,000 can be used for other kinds of business equipment, including
vehicles weighing more than 14,000 pounds.
To
be eligible for the Section 179 deduction, the asset must be used at
least 50% for business in the first year it is placed in service.
The cost eligible for the deduction is the business usage
percentage.
Qualifying
Property
• Tangible personal property (such
as machines, equipment, furniture)
• Certain other tangible property used for specified purposes
• Single-purpose agricultural or horticultural structures
• Certain storage facilities
• Railroad gradings or tunnel bores
Non-qualifying Property
-
Property held for the production of
income (investment property, most rentals)
-
Real property, including buildings
and their structural components, air
conditioning and heating units
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Property acquired by gift,
inheritance or trade
-
Property purchased from certain
related parties
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Controlled group to controlled group
transactions
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Property used outside the United
States
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Property used in connection with
furnishing lodging
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Property used by tax-exempt
organizations and governmental units
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Property used by foreign persons or
entities
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Property held by an estate or trust
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Property used by a passive activity
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Intangible property (including
computer software)
More Information
Source: Kerry M.
Kerstetter, MBA~CPA~ATP~ATA,
www.TaxGuru.org |
