Tax Guru – Ker$tetter Letter

Q:

Subject: sec 179

 

I was reading your article and want to be clear with a couple of your answers as I interpret.

If I buy a used motorhome I can still write off $112,000 in 2007 if the motorhome costs at least $112,000?

If I go over $450,000 in gross receipts ,I will not be able to Take this deduction?

 

thank you

A:

This is a perfect example of why the Tax Game is not for do it yourselfers.

You are seriously misinterpreting the concept behind the phase-out for Section 179.  It has nothing to do with a business’s gross income.  It has everything to do with the dollar amount of qualifying property that is acquired during the tax year in order to limit Sec. 179 to smaller businesses. Businesses that acquire more than $450,000 of qualifying equipment during 2007 will have plenty of normal depreciation deductions, so their Sec 179 will be phased out.

Before you do anything as major as buying a $100,000 plus motor home for your business, you need to work with a professional tax advisor to make sure you understand exactly what the tax ramifications will be, as well as whether a particular ownership strategy (personal, corp, LLC, etc) will make more sense for your unique circumstances.

Good luck.

Kerry Kerstetter