Use 2012 Section 179 Deductions to upgrade your IT or Telecom Equipment
Section 179 Deductions are changing, so don’t let that stop you from taking advantage today before its too late.
Section 179 Deductions are an amazing thing embedded in our tax code.
According to the IRS, Section 179 of the IRS code allows small businesses to deduct the cost of machinery, vehicles, equipment, furniture and other property. This was part of the American Recovery and Reinvestment Act of 2009. At that time, the maximum amount that a business could deduct was $250,000. In 2011, the maximum deduction that a small business could make was $500,000, but in 2012, the amount drops to $139,000.
Think about it, in the old days you’d have 3, 5, maybe 7 years to get the full extent of depreciating your hardware purchases. By that time, everything is obsolete and you’re due for another upgrade…meanwhile you are still depreciating other assets that you’ve put out of service.
Reuters recommends taking advantage now though, because Section 179 is due to expire unless congress acts. Specifically:
Purchase Property Eligible for Section 179 Deduction. The maximum Section 179 deduction is $139,000 for eligible property placed in service in tax years beginning in 2012. This amount is reduced dollar for dollar by the excess of qualified property placed in service during the tax year over $560,000. Unless Congress takes further action, the maximum Section 179 deduction for tax years beginning in 2013 will be $25,000, and the phase-out threshold will be $200,000. However, watch out if the business is expected to have (or is close to) a tax loss for the tax year, advised Keller. There is an income limitation too, so Section 179 deductions that create or increase a business tax loss are disallowed, with the excess carried over to the following tax year.
Of course you’ll always want to talk to your accountant before making any large capital purchases to ensure you follow the Section 179 code and take advantage to its fullest.