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Fast Write-Off of Business Assets

Section 179 Expensing – Code Section 179 allows taxpayers to elect to treat the cost of Section 179 property as an expense deduction for the tax year in which the Section 179 property is placed in service, instead of having to capitalize the expense and recover the cost over several years. Generally, Section 179 property is acquired by purchase for use in the active conduct of a trade or business, and is generally tangible property to which accelerated cost recovery applies. The property must be used more than 50% for business.

The Sec 179 expense deduction allows a taxpayer to expense up to $500,000 of qualifying property, which includes machinery, equipment, off-the-shelf computer software, and qualified real property (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property). The annual expensing limit is reduced by the cost of qualifying property that is placed into service during the year that exceeds a $2 million investment limit. 

Bonus Depreciation - For qualifying assets purchased and placed in service during the tax year, trades or businesses are allowed to depreciate an additional 50% of the cost of the assets through 2017. After 2017, the bonus depreciation slowly phases out by the reducing the percentage of cost over a period of years as illustrated below:

o 50% through 2017,
o 40% for 2018 and
o 30% for 2019.

Bonus depreciation applies to personal tangible property with a class life of 20-years or less placed in service during the year for which the original use began with the taxpayer.

Bonus Depreciation also applies to:

o Qualified leasehold property (interior qualified improvement to non-residential property after the building was placed in service).
o Certain plants bearing fruits and nuts that are planted or grafted before January 1, 2020.

Please call if you would like to discuss how these tax benefits apply to your business situation.

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