Depreciation Section

by David Jenyns on January 25, 2012

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Depreciation Section

Depreciation Section 179
So I’d have to assume at this point that the “depreciation section 179” is something you’re already acquainted with.

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Just to make sure, I should explain that it is a recently implemented program courtesy of the US government that says: any qualifying piece of property that a business entity purchases, can be written off for the full purchasing price.

Ok then, according the IRS, a depreciation deduction is a reasonable allowance for the exhaustion, wear, and tear. (Including a reasonable allowance for obsolescence.)

This would include:

•Property used in a trade or business
•Property used for production of income
•Land is never depreciable
•A mixed use asset (but not the personal part)
Now under the current tax laws there are a few methods to calculate your own depreciation, these include:

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•A regular MACRS (Modified Accelerated Cost Recovery System)
•A straight line method over the MACRS recovery period
•Or, Straight-line over the Alternative Depreciation System (ADS) recovery period
So basically, the method you approach is going to depend on whether you’d like to maximize your deduction for that first year or not, which is essentially what section 179 is all about.

There are different rules when filing for the deprecation section 179:

•A husband and wife will be considered one entity
•You can claim a deduction for the cost of qualifying property acquired for use in a trade or business
•You cannot claim the deduction on property you hold only for the production of income
•An estate or trust cannot claim the deduction
•The maximum deduction is $128,000
The total cost that you can deduct each year is limited to the taxable income from the active conduct of any trade or business during the year. Taxable income includes salaries and wages, gains, (losses), or income from a sole proprietorship, and any trade or business income allocated to you from a partnership or S corporation in which you actively.

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So if you’d like to get some big bucks back from same major business expenses this year, you should elect to file the 179 deduction, because this will not automatically be done for you.

To learn more about the different ways you might qualify to file for a section 179 deduction, visit TurboTax Online today. They offer step by step instruction on pretty much any tax related questions you may have.

 

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