Under the American Recovery and Reinvestment Act, Section 179 of the tax code provides tax benefits for equipment purchases made before the end of the year. Typically when you purchase an item for your business, you can claim a tax deduction for it. But fixed assets are not counted in the year of purchase. Instead, they must be depreciated over a number of years. Section 179, however, allows you to fully deduct the cost of assets such as computers, furniture, certain business software, vehicles, manufacturing equipment and more in the year of purchase – up to a certain amount.
Section 179 deduction limits change each year. Here’s what’s new for 2012:
- For 2012, the limit for any individual piece of equipment is now $139,000, as long as total purchases in either year do not exceed $560,000. This means that if you buy or finance a piece of new or used equipment, you can deduct the full purchase price (up to $139,000) from your gross income.
- For expenditures above $560,000, the amount you can deduct is reduced by a dollar for each dollar over.
- A “Bonus Depreciation” provision allows you to deduct 50 percent of the cost of certain property after you’ve taken the Section 179 deduction and in addition to the standard depreciation deduction.