Section 179 – back again

By | March 18, 2010

This write-off is subject to a phase-out Ok, it’s been awhile – I can talk about Section 179 again. Because it’s back, baby!!

Just this week, congress passed a job-creation / tax cuts bill that’s aimed at rewarding businesses who hire new people. Called The Hiring Incentives to Restore Employment Act (or HIRE – clever, huh?), it seeks to give tax breaks (in the form of a social security tax exemption) to businesses that hire a previously unemployed (for 60 days) person.

Furthermore, the HIRE Act will provide a $1,000 tax credit (to be taken in 2011) for every new employee retained for 52 weeks. This is a good thing – maybe this will help a few out of work people get jobs.

But to me, the biggest news is tacked onto this bill was our old friend Section 179. This new HIRE Act keeps Section 179 around for at least another year. And even better, the “higher limits” that were first instituted two years ago were kept. This means businesses may elect to write-off up to $250,000 of certain capital expenditures (generally meaning equipment purchased) in 2010. So instead of depreciating a piece of purchased equipment over time, the entire purchase price can be written off in the first year. Nice.

This write-off is subject to a phase-out once these expenditures exceed $800,000. But still, this is BIG BIG news for businesses. And it’s big news for me, because when a business combines equipment financing (and equipment leasing) with Section 179, the benefits are profound. In many instances, a company could actually write off MORE than the first year’s finance payments total, making leasing equipment a profitable venture for the fiscal year. Again – nice!

Anyway, now you know – Section 179 is back. So if you were thinking about buying new equipment, 2010 is your year!

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3 thoughts on “Section 179 – back again

  1. Stan

    Chris,
    Section 179 is indeed a huge help to businesses looking to finance. Now if banks would loosen up their lending departments a lot of small businesses would be able to get out from this poor climate.

    Reply
  2. Jessica Paulk

    If I had a 2011 fiscal year that ending in June 2012, would I be able to use the $500,000.00 section 179 limit on equipment purchased between January 1st and June 30th of 2012 or would I have to drop down to the new 2012 section 179 limit?

    Reply
    1. theLeaseGuy Post author

      Great question.

      Businesses with a fiscal year-end that begins in 2011 can take advantage of the higher Section 179 limit of $500,000 all the way through their fiscal year-end in 2012.

      However, businesses with a fiscal year-end that begins in 2011 can not take Bonus Depreciation for qualifying assets placed in service after December 31, 2011.

      If you plan to take advantage of the larger first-year deductions by making significant capital expenditures in 2011 or 2012, I recommend asking your tax advisor to compute your actual deduction — especially if you operate on a fiscal tax year, where the Section 179 limits apply to a different time frame than Bonus Depreciation.

      Reply

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