Are you planning on opening a business soon? Or maybe just planning on placing some new equipment or property in service for your existing business?
The Sec. 179 election to expense certain business assets allows a deduction in the year the eligible property is placed in service, limited to $500,000 between 2010 and 2014 and $25,000 for 2015 unless extended retroactively (Secs. 179(a) and 179(b)(1)). The limitation is reduced when the cost of eligible property placed in service during a tax year exceeds $2 million between 2010 and 2014 and $200,000 for 2015 (Sec. 179(b)(2)).
A taxpayer's return must specify the items and cost of property to which the Sec. 179 election applies (Sec. 179(c)(1)). Although the election is usually irrevocable, for tax years after 2002 and before 2015, a taxpayer may revoke the Sec. 179 election for any property (Sec. 179(c)(2)). This statutory provision expands the time frame provided in Regs. Sec. 1.179-5(c).
The repair regulations permit deduction of expenses for materials and supplies for items costing up to $200. This provides a tax deduction in addition to any amounts expensed under Sec. 179. The repair regulations' de minimis safe harbor of $500/$5,000 per item also will preserve the Sec. 179 dollar limitation, but at the cost of a book net income charge.
Thus, when capital expenditures exceed the overall dollar limitations in Sec. 179, applying the repair regulations in conjunction with Sec. 179 may provide a larger overall deduction than either Sec. 179 or the repair regulations would allow separately.
Credit: Journal of Accountancy
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