Some Section 179 deductions to end this year

If you own a profitable business, and you plan to purchase property, vehicles or equipment for the business, you may want to act quickly. The increased section 179 expense deduction limit of $500,000 expires by the end of 2011. Also, the definitions of section 179 property will be changing after this year.

Depreciation on dictionary page

What does this mean? Instead of depreciating a business asset (e.g., a truck, computers, office furniture) over a number of years, you might be able to deduct the entire expense this tax year. If your business is operating at a profit, claiming the Section 179 deduction can be one way to improve your cashflow by decreasing your tax liability. The key is to place the acquired qualifying asset in service during the current tax year in order to claim a Section 179 deduction.

I’m actually taking advantage of this myself by buying a new telephone system before the end of the year.

According to Form 4562 (2011) available at …

  • The maximum section 179 expense deduction currently is $500,000 ($535,000 for qualified enterprise zone property). This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $2 million.
  • For tax years beginning after 2011, the increased section 179 expense deduction limit of $500,000 and threshold amount before reduction in limitation will no longer apply.
  • The 100% special depreciation allowance will not apply to most property placed in service after December 31, 2011.For tax years beginning after 2011, the definition of section 179 property will no longer include certain qualified real property.

The IRS has created a page about Form 4562 at Any future developments affecting Form 4562, which may include legislation enacted, will be posted on that page.

Remember, assets need to be purchased and placed into service before the year ends. For more information regarding the section 179 deduction, please contact your CPA or tax specialist.