Is Your Business Going to Lose This Deduction?
Posted by Len Diana on Tue, Aug 23, 2011 @ 08:25 AM
This is not an exciting topic but it is important to how you may want to end 2011. With all the fuss in Washington over the country’s debt, it is highly probable that this tax deduction for business will disappear at the end of the year. If you’re not familiar with Section 179 of the IRS tax code, it allows businesses to deduct the full purchase price of qualified equipment and/or software purchased or financed during the tax year. Here it is at a glance:
- Deduction limit--$500,000 (up from $250k previously), good on new and used equipment, including software.
- 2011 Limit on equipment purchases-- $2Million Dollars (up from $800k)
- “Bonus” Depreciation—100% (taken after the $500k deduction limit is reached). Note, bonus depreciation is only for new equipment. This can also be taken by businesses that exceed $2million in capital equipment purchases.
Check out http://www.section179.org/section_179_deduction.html for additional information as well. It is a great resource.
This is a valuable incentive for businesses to invest in themselves. If you are a small business that hasn’t upgraded your machinery, computers, or software in recent years due to the economy, this may be the last year for you to take advantage of this deduction. Here’s the link to the IRS interpretation as well:
http://www.irs.gov/publications/p946/ch02.html
Or this article from the IRS: http://www.irs.gov/businesses/small/article/0,,id=213666,00.html
Baesis is not an accounting firm so we can’t give tax advice. Please consult with your accountant to see what purchases you’ve made so far this year qualify. If you’re an accountant who’s stumbled upon this, please leave us with your thoughts.
