In general, 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. The maximum annual expensing amount generally is reduced dollar-for-dollar by the amount of Code Sec. 179 property placed in service during the tax year in excess of a specified investment ceiling.
The 2012 Taxpayer Relief Act increases the maximum expensing amount under Code Sec. 179 to $500,000 for 2012 and 2013. The 2012 Taxpayer Relief Act also increases the investment-based phaseout amount for tax years beginning in 2012 or 2013 to $2,000,000.
However, for tax years beginning after 2013, the maximum expensing amount is scheduled to drop to $25,000 and the investment-based phaseout amount is scheduled to drop to $200,000. We anticipate broader “business tax reforms” in the middle part of 2013. We will keep you posted as this law progresses.
The Act also provides that:
- Off-the-shelf computer software is expensing-eligible property if placed in service in a tax year beginning before 2014 (a one-year extension).
- For tax years beginning before 2014 (also a one-year extension), an expensing election or specification of property to be expensed may be revoked without IRS’s consent. But, if such an election is revoked, it can’t be reelected.
- For any tax year beginning in 2010, 2011, 2012, or 2013 (a two-year extension) up to $250,000 of qualified real property (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property) is eligible for expensing under Code Sec. 179.
If you have any questions regarding Code