Thursday, October 9, 2008

Section 179 Depreciation Limits Reduced in 2009

This is a reminder that came up this month in a meeting of Chief Executive Boards International. You're probably familiar with Section 179 of the Internal Revenue Code, which allows small businesses to depreciate qualifying capital purchases 100% in the year put into service, rather than stretching out the depreciation deductions over 5, 7 or more years.

The reminder is that the current maximum deduction limits were raised by the Economic Stimulus Package, and will be reduced in 2009.

Through the end of 2008:

  • The maximum Section 179 deduction for 2008 is $250,000. This limit reverts to $125,000 in 2009 and 2010.
  • The deduction is reduced, dollar-for-dollar, by the total value of Section 179 property exceeding $800,000 put into service in 2008. This threshold is reduced to $500,000 in 2009 and 2010.
  • Remember, the 179 deduction in any given year may not exceed your total taxable income in that year (you cannot use Section 179 deductions to take you into a net loss).

So, if you plan to exceed $125,000 in Section 179-qualified capital expenditures in a year, make sure they're delivered and put into service by December 31, 2008. As always, check with your tax advisor for the specifics of your own situation.

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Terry Weaver

Chief Executive Boards International

Chief Executive Boards International: Freedom for business owners & CEOs -- Less Work, More Money, More Freedom to enjoy it

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