Business owners might have a big incentive to hurry up and make their large equipment purchases before the end of 2013. Unless current legislation is extended, Section 179 deduction limits will be drastically reduced beginning in 2014. Section 179 applies to long-term tangible personal property that you buy (new or used) to use in your business more than 50% of the time.
For 2013, Section 179 is limited to $500,000, and it begins to phase-out as your property purchases exceed $2 million. In order to qualify for the deduction in 2013, the property must be in service as of December 31, 2013.
For 2014, Section 179 is scheduled to be limited to $25,000, and the phase-out level will begin at $200,000. President Obama has proposed raising the deduction to possibly $1 million and perhaps even making that number permanent. But this proposal is far from becoming a reality, and given the dysfunctional environment in Washington, D.C., there’s a good chance that the Section 179 limit might stay at $25,000 until after 2014’s mid-term elections.
In order to claim the Section 179 deduction, you must have net business taxable income in excess of your Section 179 deduction. If you have a loss, you cannot deduct Section 179 in the current year.
Examples of tangible personal property that qualify under Section 179 include computers, business equipment and machinery, office furniture, and software. Examples of items youcannot deduct under Section 179 include the cost of land, permanent structures attached to land (buildings, fences, etc.), and intangible assets.
At Eilts & Associates, we are available to help you make the most of your available tax deductions for your small business. Contact us (773.252.6171 or firstname.lastname@example.org) to set up a time to discuss what the potential changes to Section 179 mean for your company.