IRC Section 179 Rules Extended!!

December 24th, 2014 at 8:38 PM

On December 16, 2014, Congress passed the “Tax Increase Prevention Act of 2014”, that the President signed into law on December 19, 2014. The Act extends through 2014 a number of depreciation and other expensing provisions for businesses that had expired at the end of 2013.

Just for 2014, taxpayers return back to the $500,000 Section 179 limit and the $2 million overall investment limit. Included in the law were the prior rules that taxpayers cannot deduct Section 179 depreciation in excess of income. For example, if a Company has a $100,000 of profit, the 179 deduction cannot exceed $100,000; the additional equipment purchases exceeding $100,000 would be depreciated under the standard time periods. The Act also extended the classification of up to $250,000 of Qualified Leasehold Improvement property, Qualified Restaurant property, and Qualified Retail property as eligible for expensing under Section 179.

Brief History of IRC Section 179

Previous to 2007, the annual Section 179 limit was $25,000. In an attempt to assist business during the difficult economic periods, Congress increased the amount that could be deducted under Section 179–from 128,000 in 2007 to $500,000 in 2010 through 2013. The limit went back to $25,000 on January 1, 2014…until now.

IRC Section 179 Basics

Section 179 is one of the most useful tax deductions for small businesses. It allows the small business to deduct in a single year the cost of tangible personal property they purchase and use for their business. This can be a huge cash flow boost for the small business who understand how to utilize this generous section of the Internal revenue Code. The equipment needs to be put into service before December to utilize the full value of its cost as a tax deduction in that year; the equipment could be 100% financed!!

The SUV/Truck Deduction

Don’t forget SUV’s and Trucks with less than a 6 foot bed, but weighing 6000 lbs gross vehicle weight or more, will be allowed the $25,000 deduction, and you can utilize the deduction if it creates a net-loss in your business.

Bonus First-Year Depreciation

The law extends 50% first-year bonus depreciation for one year so that it applies to qualified property acquired and placed in service before January 1, 2015.

The Section 179 limit will return to $25,000 level in 2015 unless Congress takes action to extend it again.