Wednesday, December 23, 2015

Section 179 becomes permanent

Section 179 example deductions


Thanks to IRS Section 179 of the IRS tax code many small businesses that invest in new equipment will be able to write off up to 100% of these purchases on their 2015 IRS tax returns.  1  The qualifying vehicle must be purchased and placed into service between January 1, 2015 and December 31, 2015.
Tax Savings for Small Businesses - Section 179It must be used at least 50% for business, based on mileage, in the first year it is placed in service. So if you choose to use it for both personal and business use, the cost eligible for deduction would be the percentage used for business.  This analysis applies only to vehicles placed in service in the United States after December 31, 2014 and by December 31, 2015, with no written binding contract for acquisition in effect before January 1, 2015. The aggregate deduction of $25,000 under Internal Revenue Code Section 179 is most beneficial to small businesses that place in service less than $200,000 of “Section 179 property” during the year (vehicles and other business property). 
2IRC Section 280F(d)(7)(B) requires that the limitation under IRC Section 280F(a)(1) be adjusted annually, based on the CPI automobile component for 
2015 Tax Deduction for your Small BusinessOctober of the preceding year. The IRS officially announced the Section 280F depreciation limits in Revenue Procedure 2015-19. The passenger automobile limitation is $3,160; the trucks/vans under 6,000 lbs. limitation is $3,460. The expensing restrictions under Section 280F do not apply to vehicles that are considered to be “qualified nonpersonal use vehicles” (QNUVs). A QNUV is generally a vehicle that, by virtue of its nature or design, is not likely to be used more than a de minimis amount for personal purposes. For more information, see Income Tax Reg., Sec. 1.280F-6(c)(3)(iii), Income Tax Reg. Sec. 1.274-5T(k), and Revenue Ruling 86-97, and contact your tax advisor for details. Consult your tax advisor as to the proper tax treatment of all business-vehicle purchases.  

Generous Section 179 deduction rules made permanent
The Section 179 deduction allows the cost of qualifying new and used depreciable assets (including most software) to be fully written off in Year One. For assets placed in service in tax years beginning in 2015 and beyond, the new law maintains the maximum Section 179 deduction allowance at the generous figure of $500,000 (same as for the last few years). For post-2015 years, the $500,000 cap will be indexed for inflation.

For tax years beginning in 2015, Section 179 deductions can also be claimed for up to $250,000 of qualifying real property expenditures. For 2016 and beyond the $250,000 cap on real property expenditures is eliminated. However, deductions allowed for real property expenditures reduce the overall $500,000 Section 179 deduction cap.

50% first-year bonus depreciation extended through 2017
The new law allows 50% first-year bonus depreciation for qualifying new (not used) business assets that are placed in service in calendar years 2015-2017. This break combined with the Section 179 deduction can lead to big tax savings for small and medium-size businesses.