ATX 2014

Section 179 Property

A qualifying taxpayer can choose to treat the cost of certain property as an expense and deduct it in the year the property is placed in service instead of depreciating it over several years. This property is frequently referred to as section 179 property.

The Small Business Jobs Act (SBJA) of 2010 increases the IRC section 179 limitations on expensing of depreciable business assets and expands the definition of qualified property to include certain real property for the 2010 and 2011 tax years.

Under SBJA, qualifying businesses can now expense up to $500,000 of section 179 property for tax years beginning in 2010 and 2011. Without SBJA, the expensing limit for section 179 property would have been $250,000 for 2010 and $25,000 for 2011.

The $500,000 amount provided under the new law is reduced, but not below zero, if the cost of all section 179 property placed in service by the taxpayer during the tax year exceeds $2,000,000.

The definition of qualified section 179 property will include qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property for tax years beginning in 2010 and 2011.

SBJA also removes cellular telephones and similar telecommunications equipment from the definition of listed property for tax years beginning in 2010.

Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010

The 2010 Tax Relief Act provides for a $125,000 dollar limit (indexed for inflation) and a $500,000 investment limit (indexed for inflation) for tax years beginning in 2012 (and sunsetting after December 31, 2012). The 2010 Tax Relief Act also extends the treatment of off -the-shelf computer software as qualifying property if placed in service before 2013.

Depreciation Limits on Business Vehicles

The total depreciation deduction (including the section 179 expense deduction) you can take for a passenger automobile (that is not a truck or a van) you use in your business and first placed in service in 2011 is increased to $3,060. The maximum deduction you can take for a truck or van you use in your business and first placed in service in 2011 is increased to $3,260 (not including the bonus bump up of $8,000).

Qualified Real Property

For any tax year beginning in 2010 or 2011, a taxpayer can elect up to $250,000 of the $500,000 section 179 deduction limit (subject to the investment limitation) for qualified real property which is depreciable and acquired by purchase for use in the active conduct of a trade or business (Code Sec. 179(f)(3), as added by the 2010 Jobs Act).

Qualified Real Property is property assigned to the Category of "R-Real Property" and Sub-Category "R-7, R-8 or R-10."
Qualified leasehold improvement property as described in Code Sec. 168(e)(6);
Qualified restaurant property as described in Code Sec. 168(e)(7) (without regard to that section’s requirement that the property be placed in service in 2009); and
Qualified retail improvement property as described in Code Sec. 168(e)(8) (without regard to that section’s termination provision for improvements placed in service after 2009) (Code Sec. 179(f)(2), as added by the 2010 Jobs Act).