Depreciation Options for Small Business Owners | Tax Tip of the Week | No. 79
There were a lot of last minute changes made
in the tax code regarding how you can deduct capital assets you purchased. Rather than depreciating business property over several years, these optional methods allow you to expense certain property in the year placed in service.Section 179This optional method of accelerating depreciation allowances has been in the tax code for years. However, the limits have changed many times. Here are the current rules:
- $500,000 maximum deduction with a $2,000,000 phase-out
- In effect for tax years 2010 and 2011
- Assets purchased can be new or used
- Cannot create an NOL by using Section 179, but can carryforward an unused Section 179 amount
Section 168This is sometimes called “Bonus Depreciation” and is relatively new. It can be used in conjunction with a Section 179 election or in lieu of a Section 179 election. The latest rules are:
- 50% bonus depreciation for qualified assets placed in service from 1/1/10 - 9/7/10
- 100% bonus depreciation for qualified assets placed in service from 9/8/10 - 12/31/11 with no dollar limitation
- Capital assets purchased must be new
- Must "opt-out" of using this election if you decide not to take it
- Can be used to create an NOL
Confused? This is only the summary—we can’t wait to tell you all the details! You will definitely want to call us if contemplating these deductions.You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.Rick Prewitt - the guy behind TTW...until next week.