Small Biz Jobs Act

Section 179 Extended Even More!

The Section 179 deduction allowance for capital expenditures is now increased as part of the Small Business Jobs Act. (This deduction allows businesses to expense qualified equipment and software purchases all at once on the tax return, up to a certain dollar limit.)  That limit has just been raised from $250,000 to $500,000 of qualified equipment and software. These caps are set for 2010 and 2011 spending.  The benefit used to phase out after $800,000 in annual equipment purchases. Now a business tops out at $2,000,000 in spending. 

In order to qualify for this deduction, the equipment or software must be purchased and put into use in the year the business uses the deduction.  The list of qualifying property follows the type of equipment small businesses usually purchase.  Some examples of qualifying property include:

  • Equipment purchased for business use
  • Business Vehicles with a gross vehicle weight in excess of 6,000 pounds
  • Computers
  • Computer Software (off the shelf)
  • Office furniture & equipment

It is important that the equipment is actually purchased in a regular business transaction.  There are exclusions in terms of what constitutes qualified property (for example it needs to be property primarily used in the US) and who can use the deduction. (Trusts and Estates are not eligible.)  Some good news is that you get to deduct the full amount no matter when in the year you buy or start using the asset. 

This Small Business Jobs Act also extended the 50% bonus depreciation deduction that has been in place since 2008. It allows immediate write-off of half the cost of depreciable property placed in service in 2010. In addition, the legislation expands the definition of qualified expenditures to include up to a $250,000 deduction for qualified leasehold, restaurant and retail property improvements.

How you use these tools to reduce your tax liability is specific to your situation. It’s easy to set up an appointment at Nicksich & Neel by calling us or sending an e-mail to info@thecpa.us. That way you can see exactly what these changes mean to your bottom line. There are other changes worth noting in the Small Business Jobs Act, and we can review those as well when we meet!