IRS Section 179

The ‘Tax Relief Act of 2010′ Section 179 Tax Deduction enables businesses to expense the first $500,000 of capital equipment or software acquired in 2011 regardless of whether the acquisition is purchased with cash or financed. Businesses must act before the end of the year to take advantage of the federal government’s offer.

Section 179 allows businesses to expense, up to a certain limit, the entire purchase price of qualifying equipment financed in the year 2011 (i.e. deduct the entire purchase price from this year’s current gross income as opposed to taking depreciation deductions over time). Qualifying equipment purchases generally include:

  • Property attached to the business but not part of the structure
  • Machines purchased for business use
  • Tangible personal property used in business
  • Business vehicles with a gross weight in excess of 6,000 lbs
  • Computers and software
  • Office furniture/equipment

Under the ‘Tax Relief Act of 2010′ Section 179 deduction, the equipment investment limit is $2,000,000 – meaning all businesses that purchase or finance less than $2,000,000 in business equipment will qualify to write-off $500,000 of each equipment or software acquisition in 2011. Businesses purchasing more than $2,000,000.00 can still receive some Section 179 benefit until they reach a ceiling of $2,500,000.

The ‘Tax Relief Act of 2010′ includes a “Bonus Depreciation” provision allowing businesses to expense new equipment or software acquisitions not covered by Section 179 regardless of whether the equipment or software is purchased outright or financed.

Businesses choosing to lease rather than buy equipment could take advantage of the Section 179 deduction by leveraging a non-tax capital lease and writing off up to $500,000 through the Section 179 deduction. “The amount you save in taxes can actually exceed the payments,” adds.

To take advantage of this incentive, companies must act before the year ends as these figures will revert to their previous levels.

The purpose of these increases is to get people off the fence on whether or not to purchase new equipment and invest in their companies.

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