Contact Us
Firm Overview
Why Legend Is Different
Client Types
Professional Biographies
Frequently & Rarely Asked Questions
Risk Spectrum
Investment Strategies
Second Opinion
Global Investment Pulse
Event Calendar
Press Center
Legend News
Clients Only
Career Opportunities
Newsletter Sign-up
Site Search
Site Map
Tell A Friend About This Website
Informational Booklets   


Phone: (412) 635-9210
  (888) 236-5960
Connect With Legend:
Subscribe to me on YouTube

How To Take Your Section 179 Deduction To The Max

Normally, it take several years to write off, or “depreciate” the cost of property such as equipment that your business has placed in service during the year. But business owners have a secret weapon at their disposal. By making a special tax return election, authorized by Section 179 of the tax code, you can frequently deduct all or most of the cost of qualified property that you acquire during the year.

Yet there are certain restrictions on the Section 179 deduction a business operation may claim. Significantly, you must contend with an annual limit on the maximum deduction amount. What’s more, this maximum write-off will be reduced by more than $100,000 in 2013 if Congress doesn’t amend the law before next year.

A quick review: Any business—including corporations, partnerships, and self-employed operations—can choose to currently deduct the cost of qualified business property placed in service during the year. For this purpose, “qualified business property” includes most types of tangible personal property. (Special rules apply to vehicles.) The property may be either new or used.

Prior to 2008, the maximum Section 179 deduction was gradually increased from $25,000 to $125,000. But then legislation doubled the maximum allowance to $250,000 and then again to $500,000, in addition to authorizing “bonus depreciation” deductions for qualified business property. A business could sometimes claim both the Section 179 deduction and bonus depreciation deductions for the same assets. 

Subsequently, the maximum $250,000 Section 179 deduction was extended, but then halved to $125,000 (inflation-indexed to $139,0000 for 2012.) Warning: After 2012, this maximum amount is scheduled to plummet all the way to $25,000! That will give many business owners plenty of tax incentive to place assets in service to benefit from the higher current write-off.

Be mindful that there are two other important considerations: 

1. Annual income limit. The Section 179 deduction can’t exceed the net taxable income from your business activities. For example, if you own a small business producing $100,000 a year in net taxable income and you acquire $125,000 of qualified business property this year, your Section 179 deduction for 2012 is limited to $100,000. If you operate several businesses, the limit applies to the net taxable income from all of your business activities—not just one particular business.

2. Annual dollar threshold. If the total cost of property placed in service during the year exceeds an annual threshold, the maximum Section 179 deduction is reduced on a dollar-for-dollar basis. This dollar threshold has been adjusted by legislation along with the maximum Section 179 allowance. Currently, the reduction begins if the cost of qualified business property exceeds $500,000 (inflation-indexed to $560,0000 for 2012.) In other words, if you place $600,000 of assets in service in 2012, the maximum Section 179 deduction is reduced by $40,000 from $139,000 to $99,000.

Generally, the optimal strategy for 2012 will be to pile on more equipment purchases to take advantage of the six-figure deduction. But that’s not always the best idea. For instance, if you expect 2012 to be a low-income year for various reasons and you anticipate that your tax liability will be much higher in 2013, you might either bypass the Section 179 deduction this year or postpone the acquisition of qualified business property to next year when the Section 179 deduction will be more valuable to you. 

Finally, note that the Section 179 deduction can still be combined with 50% bonus depreciation deduction for 2012. Unlike the Section 179 deduction, bonus depreciation is available only for new, not used, property that otherwise qualifies under the law. If any amount remains after the Section 179 deduction and the bonus depreciation deduction are claimed, it can be written off under the regular depreciation rules. Bonus depreciation is scheduled to vanish after this year. 

The practical approach now is to sit down with your tax advisor to assess your current situation. Then you can develop a plan for 2012 based on your personal circumstances. Because of the potential impact of the national election—not to mention an unpredictable Congress—you might want to wait until December before you take any action.

This article was written by a professional financial journalist for Legend Financial Advisors, Inc. and is not intendedas legal or investment advice.

  • New Deduction Rules For Business Owners
  • ''New and Improved'' QSBS Tax Break
  • Six Tax Items For Small Businesses
  • Now Is A Perfect Time To Open A New Business
  • Do You Know If Your Business Really Is Small?
  • 4 Estate Issues For Business Owners
  • Self-Employed? Map Out Tax Details
  • 10 Easy Steps To Take If Opening A New Business
  • To Buy Or Not To Buy: That Is The Business Franchise Question
  • Ever Considered Helping Your Adult Child Open A Business?
  • Do You Know What Kind Of Business Not To Open?
  • Do You Plan To Move Your Business To A New State?
  • Dispel These 7 Popular Myths About Retirement
  • 4 Retirement Plan Options For Your Small Business
  • Are Stocks Overpriced And Forming A Bubble?
  • 4 Steps To Creating A Dynamic Business Budget
  • Can An Underfunded Small Business Startup Be Successful?
  • What Happens If You Have Excess Capital Losses?
  • This Is Not Granddad's 'Defined Benefit Plan'
  • Despite Much Pessimism, Slow Growth Persists
  • How To Take Your Section 179 Deduction To The Max
  • Squeeze More Out Of Bonus Depreciation Deductions
  • A Common Error In Powers Of Attorney
  • For The Self-Employed: 4 Retirement Plan Choices
  • Which States Are The Most Friendly To Businesses?
  • How Economic Myths Distort Investment Outlook
  • Don't Forget About Roth 401(k)
  • REITs: A Great Diversification Investment
  • Shopping For A Bank Account That Pays The Highest Possible Rate Of Interest
  • The Twenty Top Tax Breaks In The New 2010 Tax Act
  • Investing Defensivley Does Not Mean Deserting Stocks
  • 401(k) Alternatives For Business Owners
  • Tax Court Okays Deducting Cost Of MBA
  • Employers Find Ways To Mitigate Liability On 401(k)s
  • Working Longer: What's A Post-Retirement Job Worth?
  • Slash Taxes By Swapping Like-Kind Assets
  • Transferring The Family Business To Your Heirs
  • Business Owners Get Big Tax Cuts In Recovery Act
  • Move Fast To Corral Emergency SBA Loans
  • Risk Management
  • Estate Taxes And The Obama Administration
  • Gifting A Business Can Cut Estate Taxes
  • A Little Bond Logic Yields Insights
  • Avoiding The IRA Rollover Crackdown
  • Ruling Cites Business Owner Responsibility to 401 (k) Plans
  • Ruling Cites Business Owner Responsibility to 401(k) Plans
  • How Much Is Your Business Worth?
  • Managing Cash Flow In Tight Times
  • When Times Are So Scary, Opportunities Emerge
  • Avoid Being Accused Of Insider Trading
  • Lifecycle Funds May Pose A Hidden Danger
  • Funding A Friend's Business Venture
  • Beware Of Social Security Identity Theft
  • Regulatory Guidelines Update
  • Small Business And Work Opportunity Tax Act
  • The Oil Patch Profit Squeeze
  • Free Credit Reports Available Online
  • Understanding the Importance of a Fiduciary Standard
  • Energy Systems Scale and Timeline
  • Timber As A Liquid Investment
  • Timber Facts
  • Emerging Market Food Consumption Growth Equals Rising Prices
  • Bank Loan Funds - A Primer
  • Ethanol: Salvation or Panacea?
  • Emerging Market Food Consumption Growth Equals Rising Prices
  • A Primer On Managed Futures
  • Identity Theft: What Documents Should You Shred Or Store?
  • The Case For Industrial Metals
  • Total Credit Market Debt (All Sectors) As % Of U.S. GDP
  • Know The Score
  • REITS: A Very Good Portfolio Diversifier, But Should You Invest In Them?
  • Does Investing Internationally Still Diversify Your Portfolio
  • Another Way To View The Current Valuation Of REIT Sector
  • Understanding Risk-Preparing For The Unseen
  • Bank Loan Funds: A Great Fixed Income Investment As Interest Rates Rise
  • What Is Shorting Expense?
  • How Dangerous Is A Dollar Crash?
  • How Volatile Can The Stock Market Be?
  • GMO 7-Year Asset Class Return Forecast Is Bleak
  • Too Many ''Phish'' In The Sea
  • Identity Theft In The New Year
  • Ways To Improve The Score
  • To Reinvest Or Not To Reinvest
  • Why Not Alternative Fixed Income Investments?
  • Just How Expensive Is The Market?
  • Beware of Brokerage Firms' Misconduct
  • Identity Theft : Correct Those Credit Reporting Errors
  • Risk-Controlled Investing
  • Q & A With Robert Arnott
  • Identity Theft : Applying For Credit? Better Check Your Credit Report First
  • Identity Theft: Everyday Prevention
  • Identity Theft : Help Is On Its Way
  • Identity Theft: Tips To Protect Yourself
  • Identity Theft : Don't Fall For That E-Mail!
  • Identity Theft : One More Reason To Protect Your Credit
  • Identity Theft: A Note About Social Security Numbers
  • What Do Rising Interest Rates Mean For Money Market Yields?
  • Exit Gracefully: How Business Owners Should Plan For A Comfortable Retirement
  • Section 529 Plans Are Popular But Not The Only Way To Go
  • The Importance Of Commodities In A Portfolio
  • A Tale Of Two Hedges
  • IRS Refuses Change Of Section 179 Election To Expense Depreciable Property
  • Small Businesses Need To Be Aggressive On Costs
  • Your Medical File Report May Need A Check-Up
  • Do It Yourself Tax Preparers Watch Out: Tax Answers From IRS Centers Oftentimes Are Incorrect And/Or Insufficient
  • Home Office Deductions: Hoops To Jump Through
  • Property Tax Challenges Should Not Be Overlooked
  • The IRS Will Follow Your Wealth To The Ends Of The Earth
  • Year-End Tax Defferal Planning
  • How To Find A Great Financial Advisor
  • Is It Time To Find A New Financial Advisor?
  • What Is Risk?
  • 4 Steps To A More Secure Investment Portfolio For Your Retirement
  • Traditional Investing May Decrease Your Retirement Lifestyle
  • Year-End Tax Planning Can Help Generate High Return On Investment
  • Businesses Receive Temporary Depreciation Bonus
  • Understanding Deflation
  • Is Your 401(k) Plan A Failure?
  • Succession Planning: Developing A Plan For Your Business
  • The ERISA Retirement Plan Law Spells Out Fiduciary Issues
  • Evaluating The Quality Of A Company's Earnings
  • Investing In Times Of Uncertainty And Risk: The Importance Of Diversification
  • Tax Issues To Consider When Buying A Long-Term Care Policy
  • Yesterday's Great Companies
  • Businesses Should Be Aware Of States' Use Taxes
  • Expanded Retirement Plan Contribution Limits Create New Opportunities For Business Owners
  • Succession Planning: Developing A Plan For Your Business

  • ©2018 Legend Financial Advisors, Inc.®. All rights reserved.