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Tax Newsletter

Business Furniture & Equipment: The Section 179 Deduction

Under certain circumstances, you may be able to take a one-time deduction for certain business furniture and equipment purchased during a particular tax year. This is commonly referred to as a Section 179 deduction.

Why It Exists

A primary purpose of Section 179 is to provide a one-time deduction for property that would otherwise require relatively complex depreciation calculations each year. However, you may still choose to deduct a portion of the property under Section 179, and take a depreciation deduction on the balance.

Limitation on Deductible Amount

The Section 179 deduction is limited to the following:

  • You cannot deduct more than the cost of the property (that is, you cannot use market value)
  • There is a maximum limit on the total amount you can deduct ($500,000 for 2013)
  • If the property is worth over $2,000,000, you must reduce the maximum dollar limit for each dollar over $2,000,000*
  • Your deduction amount under Section 179 cannot be more than your total taxable income for the year

*Large businesses with capital expenditures over $2,000,000 may elect to take a 50% bonus depreciation of the amount over $2,000,000.

Section 179 deduction may be taken for “listed property” and property purchased for business use.

Listed Property

Listed property are property generally used for entertainment, recreation and amusement. These include items such as telephones, video recording equipment, computers and related equipment. Such property must be used more than 50% for business.

Property Purchased for Business Use

Property purchased for business use may be desks, office chairs, and filing cabinets.

Converted Property

You cannot take a Section 179 deduction for personal property converted to business use. Instead, such converted property must be depreciated.

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