The Section 179 Deduction
You have a choice to either deduct the cost of certain types of property on your income taxes as an expense or you can calculate the depreciation of property purchased over a specified recovery period according to Section 179 of the United States Internal Revenue Code.
The property must be acquired for use in the active conduct of a trade or business. Buildings are not eligible for section 179 deductions.
Deducting Property Section 179
If you chose the 179 election you can only deduct the expense in the year the equipment is placed in use and it will be waived if not taken in that year. There are guidelines for certain types of property which produces income. Online income tax preparation software will be able to help with determining qualifying Section 179 deductions.
Three Limitations of Election 179
1. There is a dollar limitation
2. Limitation number two requires taxpayers who place more than $500,000 of section179 property into service during a single taxable year to reduce their 179 deduction by the amount exceeding the $500,000 threshold
3. Limitation number three states that the 179 deduction in any given year may not exceed the taxpayer’s total taxable income in that year
The Choice is Yours
If you decide to take the Section 179 deduction you must elect to do so. This deduction is not automatic. You have to make the choice to take it or to calculate the depreciation of property over a specified period of time as mentioned previously.
If you do elect to take the Section 179 deduction, you will need to use Form 4562. Once you opt to take the 179 deduction, you cannot change your mind about your selection of 179 property or revoke your election without approval from the IRS.
Calculating Your Income Tax Return
If you would like more information concerning electing to take Section 179 for property deductions I suggest you use TurboTax Online to prepare your income tax return. You can use the free tax estimator to see your refund (or tax owed) on every screen and it updates the amount as you answer questions.
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