Section 179 depreciation or the Section 179 deduction is available for most capital equipment, new or used, purchased for use in a business. If you had your 2013 S or C corporation tax returns extended, haven’t filed your partnership tax returns yet, or haven’t filed your individual tax returns with a Schedule C, take advantage of the most Section 179 depreciation you can. Section 179 allows a business, separate entity or sole proprietorship, to fully deduct the purchase price of capital equipment in the year purchased and partially or fully deduct business vehicles subject to special limits and the business use percentage. For businesses just starting out or that bought substantial capital equipment with planned growth in mind, Section 179 can provide considerable tax savings because normally most capital equipment and vehicles have to be depreciated over five or seven years under the Modified Accelerated Cost Recovery System (MACRS) tax depreciation system.
The reason you should take as much advantage of Section 179 as you can in 2013 is because in 2014 Section 179 is being restored to its original limits of $25,000 anually adjusted for inflation. For 2013, the deduction limit is still $500,000, which you can easily tell by the numbers is a very substantial difference. A related consideration is that 50% bonus depreciation is available in 2013 as well, but this can only be used on newly purchased capital assets. Lastly, keep in mind that Section 179 depreciation can only be utilized to the extent of taxable income. After it reduces taxable income to $0, any remaining Section 179 depreciation is carried over to the following tax year. For those reading, thanks again for checking out our company blog and feel free to read more about Section 179 at the following great resource –