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Deduct
$100,000
Take an additional 50% Depreciation!
Due
to changes in IRS section 179, you are now able to deduct up to $225,000.00
from your taxable income and take an additional 50% depreciation! (read
more below)
Don’t miss out on this chance to save money!
Section
179 is designed to help small businesses grow their company.
There has never been a better
time to purchase new or used equipment. Most businesses will be eligible
to deduct $585,000 from their 2008 taxable income due to IRS Section
179. New equipment will qualify for the 50% bonus depreciation from
the recently amended Jobs and Growth Tax Relief Reconciliation
Act of 2008. As long as the equipment is purchased before the end
of the year and if it was placed into service by 12/31/2008 you will
qualify for these savings this year.
| Example: |
2002 |
2007 |
| Equipment Purchase |
$800,000 |
$800,000 |
| 1st Year Write-off Tax Code 179 (new or used equipment) |
$225,000 |
$225,000 |
| Remaining Depreciable Basis |
$575,000 |
$575,000 |
| 50% Bonus Depreciation (new equipment only) |
X 50% |
X 50% |
| Bonus Depreciation |
$287,500 |
$287,500 |
| Remaining Depreciable Basis |
$287,500 |
$287,500 |
| Regular Depreciation Rate (Based on a five year asset life) |
X 20% |
X 20% |
| 1st Year Depreciation (Based on a five year asset life) |
$57,500 |
$57,500 |
| Total Deduction (See www.macfs.com for further details) |
$561,000 |
$561,000 |
Please note there is
no limit on the amount of bonus depreciation that may be claimed (50
percent or 30 percent) for all qualified property (depending on the
date placed in service).
Taxpayers may claim both
Section 179 and bonus depreciation. However, the maximum amount of purchases
to maintain eligibility for Section 179 is $800,000.00. Any amount exceeding
$800,000.00 will be reduced dollar for dollar under Section 179.
Contact
us today to discuss how these programs might benefit your organization.
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Rules
for expensing Certain Depreciable Business Assets under Code Section 179.
Property that
is new or used is eligible for expensing under Code Section 179 (if it
is purchased for a trade or business), is depreciable under MACRS and
is depreciable property as defined below.
Here are the following
broad classifications of depreciable property:
Personal
property
- Tangible property
which does not include most buildings and their structural components
and the
property is used as an integral part of manufacturing, production, or
extraction, or of furnishing transportation, communications, electricity,
gas, water, or sewage disposal services; or is a research facility used
in connection with these types of activities or is a facility that is
used for the bulk storage of fungible commodities;
Single-purpose
agricultural or horticultural buildings
- Storage facilities
(other than their buildings and structural components) that are used
in connection with the distribution of petroleum or primary products
of petroleum.
Any
railroad grading or tunnel bore
- Buildings and
other permanent structures and their components that are real property
do not qualify for expensing. Land improvements that include swimming
pools, paved parking lots, wharves, docks, bridges, and fences. Property
contained in or attached to a building such as refrigerators, grocery
store counters, office equipment, printing presses, testing equipment,
and signs do qualify.
To qualify for
expensing, property must be used more than 50 percent in the taxpayer's
business. If a property is used more than 50 percent for business and
also for investment purposes, the investment portion does not qualify
for the expensing allowance.
Commercial facilities
such as grocery stores and restaurants located within a lodging facility
are not treated as lodging facilities if available to non-lodgers on the
same basis as lodgers. Thus, property used within these facilities can
qualify for the expense allowance. A similar rule applies to vending machines
The
following property does not qualify for the Code Section 179 expense deduction:
- Property held
for the production of income which is not used in a trade or business.
- Property used
predominantly outside of the United States and property used predominantly
to furnish lodging, or used predominantly in connection with furnishing
lodging,
- Property used
by certain tax-exempt organizations unless used in connection with the
production of income subject to the tax on unrelated trade or business
income.
- Property used
by governments and foreign persons;
- Air conditioning
units and heating units including space heaters.
- Apartment
houses, hotels, motels, dormitories, or most other facilities or part
of facilities where sleeping accommodations are provided. However, property
used by a hotel, motel, inn, or other similar establishment is not considered
used in connection with the furnishing of lodging if more than half
of the living quarters are used to accommodate tenants on a transient
basis (rental periods of 30 days or less)
- Property used
in the living quarters of a lodging facility, including beds and other
furniture, refrigerators, ranges, and other equipment is considered
as used predominantly to furnish lodging.
- Property which
is used predominantly in the operation of a lodging facility or in serving
tenants is considered used in connection with the furnishing of lodging,
whether furnished by the owner of the lodging facility or another person.
Examples of property used in connection with the furnishing of lodging
include lobby furniture, office equipment, and laundry and swimming
pool equipment. Property used in furnishing electrical energy, water,
sewage disposal services, gas, telephone service or similar services
are not treated as used in connection with the furnishing of lodging.
- Rentals that
are not a taxpayer’s trade or business do not qualify for Section
179. Property may be expensed only if it is used in connection with
the active conduct of a trade or business. IRS Publication 527 clearly
states: “You cannot claim the section 179 deduction for property
held to produce rental income (unless renting property is your trade
or business).”
- Computer software
that is depreciable over three years and is placed in service in tax
years beginning in 2005, 2006, or 2007 may be expensed. Off-the-shelf
computer software is software that is readily available for purchase
by the general public, is subject to a nonexclusive license, and has
not been substantially modified qualifies for the deduction. This temporary
rule is an exception to the requirement that only tangible property
which is depreciable under MACRS may be expensed.
- Animals used
or slaughtered for use in the active conduct of a trade or business
are eligible for the Section 179 deduction. Animals include horses,
cattle, hogs, sheep, goats, and mink and other fur bearing animals.
Certain
“purchases” do not qualify for the Section 179 deduction
- Property acquired
from a person whose relationship to the taxpayer would result in a disallowance
of loss on a transaction between the taxpayers.
- Any purchase
modified for such purpose to restrict the definition of “family”
to spouse, ancestors, and lineal descendants.
- Property acquired
by one component member of a controlled group from another component
member of the same group (using a more than 50 percent control test);
or property the basis of which is determined in whole or in part (a)
by reference to the adjusted basis of a transferor or (b) under the
stepped-up basis rules for property acquired from a decedent.
- Property which
is converted from personal use to business use by a taxpayer may not
be expensed since it was not originally acquired by the taxpayer for
use in a trade or business.
As with any tax matters, please consult with your local Certified
Public Accountant.
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