“Depreciation.” For business owners, this word is the one most likely to inspire headaches and fits of cussing. The expanded provisions of Section 179 are just the medicine you need to cure the depreciation blues.
Depreciation
Traditionally, if your business property had a life of more than one year, the cost had to be deducted over several tax years. The number of years depended on the characteristics of the property, which made depreciation the flag-bearing example of the complexities of the tax code. Shockingly, the federal government has provided substantial relief to business owners.
Section 179 of the Internal Revenue Code has been dramatically expanded to the benefit of businesses, particularly small ones. This code allows businesses to completely deduct the cost of tangible property in the year of purchase. The tax relief comes from the expansion of the total amount that can be deducted in one year.
Huge Deduction Increase
As part of the Job Growth and Reconciliation Act of 2003, the one-year deduction amount was increased from $25,000 to $100,000. The 100,000 figure will be adjusted for inflation each year, which means it will continue to increase. This is very good news.
What Property Qualifies?
You can deduct the cost of the following property under Section 179:
1. Machinery and equipment
2. Furniture and fixtures
3. Computer software.
You must elect Section 179. It is not automatically given to you. Simply fill out IRS Form 4562 and attach to the returns for the business.
In Closing
As shocking as this will sound, the government should be applauded for expanding Section 179. Small businesses are burdened by too many regulations and mandatory costs. The expansion of Section 179 is a nice piece of tax relief legislation. Let’s hope more is on the way.
Richard Chapo is CEO of www.businesstaxrecovery.com - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review.
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