Code Section 179-- One Big Win for Small Businesses

With passage of the Small Business Jobs Act of 2010 on September 27, 2010, Small Businesses can celebrate an extension and increase of Code Section 179 deduction ability. Specifically, for tax years beginning in 2010 and 2011, the maximum amount of deductible assets placed in service increases from $250,000 to $500,000.

What Qualifies for Code Section 179?
• Generally speaking, the same assets that always have qualified. For 2010, new assets, purchased and placed in service between January 1, 2010 and December 31, 2010 including, among others:
 Equipment (machines, etc)
 Tangible personal property used in business
 Computers
 Office Furniture
 Office Equipment

• A new group of assets are available for Section 179 depreciation this year. Out of the $500,000 limit, $250,000 may be derived from “Qualified Real Property”.
 Qualified Real Property means (1) qualified leasehold improvements with certain requirements, (2) qualified restaurant property with certain requirements, and (3) qualified retail improvement property with certain requirements.
 As you probably noted above, there are certain requirements with each of the above categories, so you should contact our tax advisors if you feel like you qualify for this new category of Sec. 179 depreciation.

In summary, a qualifying taxpayer can choose to treat the cost of certain property as an expense and deduct it in the year the property is placed in service instead of depreciating it over several years. This property is frequently referred to as section 179 property. The Small Business Jobs Act of 2010 increases the IRC section 179 limitations on expensing of depreciable business assets and expands the definition of qualified property to include certain real property for the 2010 and 2011 tax years. Under the Act, qualifying businesses can now expense up to $500,000 of section 179 property for tax years beginning in 2010 and 2011. Without the Act, the expensing limit for section 179 property would have been $250,000 for 2010 and $25,000 for 2011.
The $500,000 amount provided under the new law is reduced, but not below zero, if the cost of all section 179 property placed in service by the taxpayer during the tax year exceeds $2,000,000. The definition of qualified section 179 property will include qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property for tax years beginning in 2010 and 2011.

In our next blog, we’ll discuss how this same act addresses vehicles purchased for your business and your depreciation options. In the meantime, if you have any questions regarding this topic or any other recent tax legislation, please contact your tax advisor or our Firm directly.

brad@mcarthurco.com
704.544.8429