ENHANCED IRC SECTION 179 DEDUCTION AND 50% BONUS DEPRECIATION EXTENDED THROUGH 2013

 


IRC Section 179 has provided businesses with the ability to substantially accelerate depreciation on qualified purchases for the last decade.  The limitation on the available deduction grew to $500,000 during 2010 and 2011 as Congress intended for the increased limits to assist businesses in light of the recession.  For 2012, the available deduction had initially been $139,000.  However, the American Taxpayer Relief Act of 2012 (the "Act"), which was passed on January 1, 2013, retroactively extended the $500,000 expensing limitation through 2012 and 2013.

IRC Section 179 allows businesses to deduct or expense the purchase price of equipment and machinery, as well as certain vehicles and software in the year of purchase, as opposed to depreciating the equipment over the life of the asset.  There are certain limitations that apply to the Section 179 deduction including a $2,000,000 cap on total equipment purchases.  Additionally, the Section 179 deduction may not exceed taxable income for the year in which it is taken.

In addition to Section 179, accelerated (bonus) first year depreciation is also available for certain new fixed asset purchases.  For 2012, the bonus depreciation available for purchases decreased from 100% in 2011 to 50% in 2012.  The bonus depreciation deduction was scheduled to expire in 2013.  However, the Act extended the 50% deduction through 2013.

(updated January 4th, 2013)

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