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Section 179 Confusion

Posted by taxguru on May 27, 2007

Q:

Subject: questions Sec. 179 expensing

Kerry,

Have read your Sec. 179 info online.  But have a couple of questions:

a)  If I expense, say, $70,000 under Sec. 179 for a $100,000 equipment buy, can I straight-line depreciate the remainder (i.e. $30,000)?  Or am I precluded from depreciation if I write off some costs via Sec. 179?

b)  The $450,000 limit.  Is that ALL the equipment i bought in 2007 that qualifies for Sec. 179 treatment, or just the equipment I bought that I am opting to apply Sec. 179 to??  (I.e. — if I buy $600,000 worth of equipment that would qualify for Sec. 179 expensing, but only choose to seek the deduction for $100,000 of the equipment, does the $450,000 limit apply to just those expenses I am seeking to expense, or to the amount of all the equipment i bought, regardless of whether I plan to expense or not????)

thanks for any insight here.

A:

a) Whatever part of the cost basis that hasn’t been expensed under Section 179 is to be depreciated over the appropriate class life and using whichever method (straight line or accelerated) you and your personal professional tax advisor deem best for your unique situation.

b)  Our supreme rulers in DC have decided that any business that has acquired more than $450,000 in new Sec. 179 qualifying equipment will be claiming large enough normal depreciation deductions that they don’t need the full Section 179 expense that “smaller” businesses need. 

Again, if you are spending this amount of money on business equipment and you are trying to do your own taxes, you are taking a very irresponsible risk.  Focus on what you know and do well in your business and retain the services of a qualified tax pro.

Good luck.

Kerry Kerstetter

 

 

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