More on Tax Code Section 179 (and what has changed for 2008)

When acquiring new equipment, including machinery, computers and other tangible goods, you would obviously prefer to deduct the entire cost this tax year (2008), rather than a little at a time over a number of years. Section 179 essentially allows just that – you can deduct, from your taxable income, the full amount of equipment purchases up to the approved limit for a given year (almost doubled to $250,000 for 2008). Of course, this assumes the equipment is installed during the calendar year.

In addition, depending on the equipment and specific scenario of the business, any excess equipment cost above the amount expensed under Section 179 can be depreciated. And again, 2008 has brought substantial changes – you can now depreciate a full 50% for the first year. Section 179 is a small business incentive for capital spending, which accelerates the economy.

Other Limits and Qualifying Property

There are some limits to section 179 - the total cost of property that may be expensed cannot exceed the total amount of taxable income during the tax year. And not all states follow federal law; contact your tax advisor for further details.

Most types of business equipment qualify for the Section 179 expensing allowance, including:

• Tangible personal property (machines, equipment, furniture, etc).
• Business Vehicles with gross weight of 6,000 pounds or greater (which includes many trucks, SUV’s, etc)
• Certain other tangible property used for specific purposes.
• Single-purpose agricultural or horticultural structures.
• Certain storage facilities.

Generally, most movable assets qualify – but permanent structures do not qualify for Section 179. Even used equipment and vehicles qualify if they are new to you. In other words, if you acquire the equipment from a source other than yourself or an entity controlled by you, it should qualify. To ensure property qualifies, please reference Publication 946.

Tax Code Section 179 is an expense deduction provided for taxpayers who elect to treat the cost of qualifying property (Section 179 property) as an expense rather than a capital expenditure. The election, which is made on Form 4562, is for the tax year the property was placed in service. Under Section 179, equipment purchases, up to the amount approved for a given year, can be deducted from taxable income – if installed by December 31st. For further detail, contact your tax advisor or visit www.irs.gov and reference Form 4562.