Tax Incentive MAKES A COMEBACK
The Section 179 Deduction is back!
The recently enacted Hiring Incentives to Restore Employment Act (HIRE) reinstates the popular Section 179 Deduction - a cash-saving tax incentive for 2010 tax year equipment purchases.
FREQUENTLY ASKED QUESTIONS
What is the Section 179 Deduction?
- Section 179 of the tax code allows small businesses to deduct the full purchase price of financed or leased qualified equipment - up to $250,000 of the cost of equipment placed in service in the 2010 tax year. As explained below, the deduction is limited if total qualified purchases for the year exceed a certain dollar amount.
What impact did the 'HIRE Act of 2010' have on the Section 179 Deduction?
- The HIRE Act maintains the maximum Section 179 tax deduction at $250,000 subject to a dollar-for-dollar phase out limit beginning at $800,000 for the tax year 2010. Without this law, the maximum deduction would only be $125,000. Please note that the HIRE Act DOES NOT extend the Bonus Depreciation tax incentive. This provision expired in 2009.
What type of equipment qualifies for this deduction?
- Qualified equipment purchases include new and used property acquired for use in a trade or business. Purchases for rental fleet use also qualify but purchases held for resale under floor plan financing terms do not qualify.
Can I finance or lease equipment and still take the Section 179 Deduction?
- In most cases, yes. In fact, this can be a very effective strategy, as the deduction you take may actually exceed the total loan or lease payments you make for the year.
Does the amount of equipment I purchase and lease in 2010 matter?
- Yes. If the total cost of your Section 179 property purchases is more than $800,000 in 2010, you must reduce the $250,000 limit for each dollar of cost over $800,000
- EXAMPLE In 2010, John Ash placed in service machinery costing $900,000. This cost is $100,000 more than the $800,000 purchase limit. John's maximum Section 179 Deduction of $250,000 is reduced by the $100,000 to a $150,000 deduction.
Are there any other limitations in taking the Section 179 Deduction?
- Yes. The total cost you can deduct each year, after you apply the dollar limit, is limited to your business' taxable income.
Does the geographic area my business operates in make any difference in the Section 179 Deduction?
- Perhaps. The IRS has designated spcial geographic zones that qualify for an increased Section 179 Deduction.
- Click here for more details on these zones. Check with your tax advisor for more information on this special Section 179 Deduction clause.
How can I calculate the potential savings that the Section 179 Deduction will have on my next purchase?
- Click on the Excel-based calculator on the right hand side of this page to estimate your potential savings.
Calculate your Savings
Use this Excel Calculator to determine your business's potential tax savings . . .