There are a multitude of deductions we can take in this
digital day and age.
Telephones and cell phones, computer equipment, faxes,
pagers, cameras, recorders, GPS device, furniture, office supplies, maps and
real estate books, etc, etc.
You’re probably already aware that these items can be
deducted as a business expense if you use them over half the time for business,
and they are not purchased from someone you are related to. Business property usually must be depreciated
over a six year time period, so you would only deduct a portion of the item per
year for six years. This seems a tedious
way to recoup your expenses.
However, there is a way to deduct the entire cost of an item
in one year. Tax code, section 179, is a
huge bonus for small business owners, including real estate professionals. Section 179 doesn’t alter the amount you can
deduct for an item, but it enables you to get the entire deduction in one year
which is much more efficient and convenient than spreading it out over years.
The deductions which fall under Section 179 include tangible
personal long-term property which is purchased for your business uses like
computers, equipment and office furniture.
Even intangible items like software used for your business can be
included.
There is a limit to what you can claim under Section
179. In 2007, the limit was
$128,000. However, due to the worsening
economy, the amount was increased to $250,000 in 2008 and was extended through
to the end of 2009.
For 2010 and 2011, the amount has been increased to
$500,000. In fact, two congressional
acts affecting Section 179 in a positive way for this 2011 tax year passed in
late 2010, The Tax Relief Act of 2010 and the Jobs Act of 2010. In addition to the increased limit to
$500,000, the total amount of equipment that can be purchased was increased to
2 million. This includes most new and
used capital equipment as well as software.
Additionally, the “bonus depreciation” was increased to 100% on
qualified assets. This includes new
equipment only.
The only drawback to using Section 179, which can be quite
limiting, is that you can’t use it to deduct more in one year that your net
taxable income for that year. Consider
bonus depreciation if your income was too low in 2010. It is not subject to income limitations.
Don’t short yourself or your business. Be sure to take full advantage of all the
deductions you are entitled to take.
Section 179 will give you an immediate advantage this tax season.