Act Now!  Take Advantage of Section 179

Section 179Can recently enhanced Sec. 179 expensing reduce your 2012 taxes?

Section 179 expensing allows businesses a 100% deduction for the cost of qualifying asset purchases. Its 2012 benefits were recently enhanced by the American Taxpayer Relief Act of 2012.  There are two limits that affect the amount of Sec. 179 that a business can take.  The first is a limit on the actual deduction each year.  The second is a limit on the cost of the qualifying assets purchased during the year.  If the total purchases exceed that second limit, then the amount available to be taken as a deduction is reduced.  In short, if total purchases for the year are large enough, a business might not be eligible for any Sec. 179 expensing.

Before the recent tax legislation, the annual expense limit for 2012 was $139,000, with a $560,000 total asset purchase limitation.  As long as a company had less than $560,000 in equipment purchases, it could immediately deduct up to $139,000 of those purchases.  Every dollar of total purchases in excess of $560,000 reduced the annual limit by $1.  By the time a company acquired $699,000 of eligible assets, there was no annual deduction available.

The act increases these amounts to $500,000 and $2 million, respectively (the same amounts that applied in 2010 and 2011) for 2012 and 2013.  These increases mean not only that many smaller businesses can enjoy a larger tax benefit, but also that some larger businesses that previously wouldn’t have been eligible because their asset purchases were too high may now qualify.

Many rules apply, so please contact us to learn if you qualify on your 2012 return — or discuss whether you should plan purchases this year to benefit from the break on your 2013 return.

Wertz & Company, LLP, is an Irvine Tax Accounting and Professional Services Firm located in Orange County, CA that specializes in working with entrepreneurs along their journey to success.