What You Should Know Before Claiming a Section 179 Deduction
A recent study conducted by the Small Business Research board revealed that taxes were what worried business proprietors the most during the 2nd quarter of 2007. With this being said, it is only natural for business owners, especially owners of small businesses, to look for ways to alleviate their tax burden. One such extremely beneficial way is to claim a Section 179 deduction.
As part of the U.S. Internal Revenue Code, Section 179 enables a taxpayer to deduct (recover) some or all of the cost of specific eligible property in the year that it was placed in service by the business. By reducing taxable income, this deduction saves income tax.
To claim the Section 179 deduction, your property must fall into the category of either:
a) Tangible Personal Property - Machinery, Gasoline Storage Tanks, Property in a Building (like office equipment, testing equipment, refrigerators and signs) and livestock.
OR
b) Qualified Tangible Property - Single purpose horticultural or agricultural structures and off-the-shelf computer software.
Buildings and their structural elements do not qualify for the Section 179 deduction. However, other tangible property used as research facilities, for manufacturing purposes, or for furnishing water, gas, communications or transportation services do qualify.
In addition to being eligible property, the property should satisfy certain other requisites
Should have been obtained by purchase and not as a gift.
Must have been purchased for full or at least partial (more than 50%) business use.
The election for claiming the Section 179 deduction should be made on form 4562. Currently, a taxpayer can claim a maximum deduction of $125,000 in a year. Also, if a taxpayer places Section 179 property amounting to more than $50,000 in use during a single taxable year, his/her 179 deduction comes down, dollar for dollar by the amount above the $500,000 limit.
In spite of all its benefits, a Section 179 deduction is not always a good option, as in the case of vehicles, so it is important to seek the advice of an experienced tax expert before taking the big step of claiming a Section 179 deduction.
For more information, view Graphic Savings' Winter 2007 Newsletter at http://www.graphicsavings.com/images/GSG_Newsletter_December_2007.pdf.
As part of the U.S. Internal Revenue Code, Section 179 enables a taxpayer to deduct (recover) some or all of the cost of specific eligible property in the year that it was placed in service by the business. By reducing taxable income, this deduction saves income tax.
To claim the Section 179 deduction, your property must fall into the category of either:
a) Tangible Personal Property - Machinery, Gasoline Storage Tanks, Property in a Building (like office equipment, testing equipment, refrigerators and signs) and livestock.
OR
b) Qualified Tangible Property - Single purpose horticultural or agricultural structures and off-the-shelf computer software.
Buildings and their structural elements do not qualify for the Section 179 deduction. However, other tangible property used as research facilities, for manufacturing purposes, or for furnishing water, gas, communications or transportation services do qualify.
In addition to being eligible property, the property should satisfy certain other requisites
The election for claiming the Section 179 deduction should be made on form 4562. Currently, a taxpayer can claim a maximum deduction of $125,000 in a year. Also, if a taxpayer places Section 179 property amounting to more than $50,000 in use during a single taxable year, his/her 179 deduction comes down, dollar for dollar by the amount above the $500,000 limit.
In spite of all its benefits, a Section 179 deduction is not always a good option, as in the case of vehicles, so it is important to seek the advice of an experienced tax expert before taking the big step of claiming a Section 179 deduction.
For more information, view Graphic Savings' Winter 2007 Newsletter at http://www.graphicsavings.com/images/GSG_Newsletter_December_2007.pdf.
Labels: Section 179, Section 179 deduction, Section 179 depreciation deduction
posted by Graphic Savings Group at 6:12 PM
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