US Tax Code Section 179 offering tax relief in 2011 for Capital Equipment purchases.
On Jan 5, 2011 Section 179 limits were increased by the ‘Jobs Act of 2010’ allowing businesses to write-off up to $500,000 of qualified capital expenditures subject to a dollar-for-dollar phase-out once these expenditures exceed $2 million.
Bonus Depreciation was also increased to 100% by the ‘Tax Relief Act of 2010’ – allowing businesses that exceed the $2 million cap to write-off 100% of qualified assets using first year Bonus Depreciation. Also, small businesses that are not profitable in 2011 can use 100% Bonus Depreciation (on new equipment only) and carry-forward the loss to future profitable years.
This should mean a substantial boost to your bottom line this year. But to get the deduction for tax year 2011, you have to act this year, as once the clock strikes midnight on 12/31/2011, Section 179 can’t increase your 2011 profits anymore.
How Section 179 Works – Section 179 allows a business to deduct the full purchase price of qualifying equipment for the current tax year instead of depreciating it over time. The equipment must be purchased and put into use the current tax year.
To give an example, if a business purchased equipment that had a total price of $25,000, that $25,000 could come right off the gross income the company reports this year. This can result in a substantial tax savings (as opposed to yearly depreciation).
Qualifying Equipment – In general terms, most business equipment qualifies for a Section 179 Deduction. Equipment such as:
- Machines and similar equipment purchased for business use
- Computers and (off-the-shelf) Computer Software
- Office Equipment (including office furniture and office machines)
- Property that is attached to a company building but is not a structural component of the building (i.e.: a printing press, large manufacturing machines, etc)
The IRS Website also maintains a more complete list and explanations of qualifying Section 179 equipment
*** Note: References/Related Links – Article is reprinted from www.irs.gov and is intended as general information only. Please contact your tax professional to see if your business qualifies.