Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income.
The purpose behind Section 179 - to motivate the American economy (and your business) to move in a positive direction. For most businesses (adding total equipment, software, and vehicles totaling less than $139,000 in 2012), the entire cost can be written-off on the 2012 tax return.
The total amount written off ($139,000 in 2012), and limits to the total amount of the equipment purchased ($560,000 in 2012). The deduction begins to phase out dollar-for-dollar after $560,000 is spent.
All businesses that purchase, finance, and/or lease less than $560,000 in new or used business equipment during tax year 2012 should qualify for the Section 179 Deduction. If a business is unprofitable in 2012, and has no taxable income to use the deduction, that business can elect to use 50% Bonus Depreciation and carry-forward to a year when the business is profitable.
The most important difference is both new and used equipment qualify for the Section 179 Deduction. Bonus Depreciation covers new equipment only.
The equipment, vehicle(s), and/or software must be used for business purposes more than 50% of the time to qualify for the Section 179 Deduction. Simply multiply the cost of the equipment, vehicle(s), and/or software by the percentage of business-use to arrive at the monetary amount eligible for Section 179.
2012 Deduction Limit = $139,000 For new and used equipment, as well as off-the-shelf software.
2012 Limit on equipment purchases = $560,000 This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced.
Bonus Depreciation = 50% This is taken after the $560k limit in capital equipment purchases is reached. Bonus Depreciation is available for new equipment only. Bonus Depreciation can also be taken by businesses that will have net operating losses in 2012.
Contact us for a bid on your capital purchase before year end. Don’t miss out on Section 179 deductions and Bonus Depreciation 801 816 0800
