Tax Planning Section 179

The following comes from Chris Torregrossa, CPA who heads up the Dental Pratice Group at Price Kong and Company.

IRC Section 179 has provided businesses with the ability to substantially accelerate depreciation on qualified purchases for the last decade. The limitation on the available deduction grew to $500,000 during 2010 and 2011 as Congress intended for the increased limits to assist businesses in light of the recession. For 2012, the available deduction has been decreased to $139,000. Without intervention by Congress, the deduction will decrease further for 2013 to $25,000.

IRC Section 179 allows businesses to deduct or expense the purchase price of equipment and machinery, as well as certain vehicles and software in the year of purchase, as opposed to depreciating the equipment over the life of the asset. There are certain limitations that apply to the Section 179 deduction including a cap on total equipment purchases ($560,000 for 2012, to be reduced to $200,000 for 2013.) Additionally, the Section 179 deduction may not exceed taxable income for the year in which it is taken.

In addition to Section 179, accelerated (bonus) first year depreciation is also available for certain new fixed asset purchases. For 2012, the bonus depreciation available for purchases decreased from 100% in 2011 to 50% in 2012. The bonus depreciation deduction is also scheduled to expire in 2013 without intervention by Congress.

Because the accelerated depreciation deduction available to businesses is scheduled to be reduced for 2013, organizations should assess whether equipment purchases planned for the upcoming year may be accelerated in order to take advantage of the depreciation deduction. (emphasis mine) With the limitations outlined above, as well as additional limits placed on qualifying purchases, organizations should consult with their CPA prior to making purchasing decisions.

Of course this is a presidential election year and there is little doubt that we will see some changes in the tax law. Never the less as Mr. Torregrossa points there are good reasons to consider making new equipment or technology purchases in 2012 before the end of the year.

2 replies on “Tax Planning Section 179”

Thank you for this piece of useful information. Santa Teresa Dental had expanded and redecorated to better serve our patients during the last two years. Check out It was a very good decision since we are actually taking advantage of the section 179. Economy is still tough and we hope that congress will keep small businesses like dental offices in mind when reviewing new laws.

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