Under Code Sec. 179 , a taxpayer can elect to deduct as an expense, rather than to depreciate, up to a specified amount of the cost of new or used tangible personal property placed in service during the tax year in the taxpayer’s trade or business.
For tax years beginning in 2010 or 2011: (1) the dollar limitation on the expense deduction is $500,000; and (2) the investment-based reduction in the dollar limitation starts to take effect when property placed in service in a tax year exceeds $2,000,000 (beginning-of-phaseout amount).
In general, property is eligible for Code Sec. 179 expensing if it is:
- tangible property (generally, machinery and equipment), depreciated under the MACRS rules of Code Sec. 168;
- for any tax year beginning in 2010 or 2011, up to $250,000 of qualified real property (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property); and
- off-the-shelf computer software, but under pre-Act law, only if placed in service in a tax year beginning before 2012. ( Code Sec. 179(d)(1) )
Under the 2010 Tax Relief Act, for tax years beginning in 2012 the maximum expensing amount under Code Sec. 179 is $125,000 and the investment-based phaseout amount will be $500,000.