Instead of depreciating an asset over several years, Internal Revenue Code Section 179 allows the expensing of all or a portion of certain qualifying new and used assets in the year placed in service. There are limitations including a business taxable income limit. You cannot claim a Section 179 write-off that would create or increase an overall business tax loss for the year. The asset must be used in an active trade or business (not a residential rental activity) and generally must be personal property.

   For 2011, the expensing election limit is $500,000. This amount applies to assets placed in service during 2011. For total investments of qualifying property exceeding $2 million, there is a dollar-for-dollar reduction of the $500,000 expense available. Unless Congress acts to further extend the higher limit, the expensing election limit will drop to about $139,000 in 2012.

   Remember a new provision from 2010 allows Section 179 expensing of up to $250,000 of some types of real estate improvement costs, which includes

  • qualified interior leasehold improvements of nonresidential buildings,
  • qualified restaurant property, and
  • qualified improvements to the interiors of retail buildings.

   This provision excludes air conditioning and heating units.  Please contact us if we can be of any additional assistance.