Section 179 continues working for you in 2010
(with some important changes.)

2010 is likely the most important year of all regarding you saving money with Section 179. That’s because change is in the air.

First, some good news: Section 179 has returned for 2010. Once more, you can deduct the full cost of business equipment – up to $250,000 worth of equipment. However, this may very well be the last year that you are able to take advantage of Section 179 as you know it. Some minor changes have already been made for 2010 (changes we’ll detail further down this page), and it also looks like more changes are in store for 2011.

But that’s ok – it’s still 2010, and Section 179 is still very attractive. Right now is the time to take advantage of it.

2010 Section 179 Allowance Calculator

And to help you with such, we’ve provided the following calculator for Section 179 deductions in 2010. This calculator is fully updated with the current limits for the 2010 tax year, and gives you a clear picture of just how much Section 179 can save you this year. Go ahead – play with it.

Cost of Equipment: Section 179 Deduction: Regular First Year Depreciation Deduction: Total First Year Deduction: Cash Savings on your Equipment Purchase: (assuming a 35% tax bracket) Lowered Cost of Equipment after Tax Savings: The calculator presents a potential tax scenario based on typical assumptions that may not apply to your business. This page and calculator are not tax advice. The indicated tax treatment applies only to transactions deemed to reflect a purchase of the equipment or a capitalized lease purchase transaction. Please consult your tax advisor to determine the tax ramifications of acquiring equipment or software for your business.

So, how much can you save?

If the numbers look good to you, they can look even better with the right equipment financing. With interest rates holding steady, a solid equipment financing partner can make Section 179 especially attractive in 2010. Here at Crest Capital, we can provide you with an Equipment Lease or Equipment Financing Loan that is structured to allow you to take full advantage of the Section 179 deduction. And if you need to finance more than the allowed deduction limit (which is still quite high in 2010), you can depreciate the excess.

Now here’s what we mean by having the right equipment financing: depending on the equipment you finance, your first year’s payments might be LESS than the Section 179 deduction you take. This means financing equipment in 2010 can actually be profitable to your bottom line this year.

Contact Crest Capital for a complimentary Equipment Financing or Equipment Lease Consultation, or read on to learn more about Section 179 in 2010.

More on Tax Code Section 179 (and what has changed / stayed the same for 2010)

At its heart, Section 179 allows small and medium sized businesses to deduct the full amount of the purchase price of equipment bought and put into use during the 2010 calendar year. Equipment can include machinery, certain vehicles, office equipment / office machines, office furniture and fixtures, computers and software, and many other types of tangible equipment. However, some changes have been made:

• Then (2008/2009): Two years ago, Section 179 received an enhancement from the Economic Stimulus Act of 2008. The deduction limits were raised to $250,000 (which was almost double from previous years), and it also installed a “bonus” first year depreciation of 50% (which was allowed on purchases that exceeded the limit.) In 2009, these new, higher limits were kept.

• Now (2010): Section 179 was renewed as part of the Hiring Incentives to Restore Employment (HIRE) act of 2010. The “higher limits” of the two previous years have been kept. But the bonus 50% depreciation did not make it in this time. In addition, it is unlikely that the “higher limits’ will see another year. 2010 may very well be the swan song of Section 179 as we know it.

Limits and Qualifying Property in 2010

Like previous years, there are limits on Section 179. The main limit is that the total cost of the equipment you are deducting cannot exceed the total amount of the taxable income you are reporting. In essence, this means you cannot have big deductions while also showing no income. Also, you always need to check your local state tax laws regarding equipment purchases that may impact your state tax return differently than your federal tax return.

As far as types of eligible business equipment, most of the “larger” tangible items necessary to run a business qualify for the Section 179 deduction, including:

• Tangible personal property (to give some examples: machines, furniture, computers, etc).
• Most Business Vehicles that have a gross vehicle weight (GVW) of 6,000 pounds or greater (this would include many SUV’s, Hummers, etc – in fact, Section 179 used to be called “The hummer tax break”.)
• Many other types of tangible property that will be employed for specific purposes (software, etc.)
• Single-purpose agricultural or horticultural structures and certain storage facilities (this doesn’t mean buildings or offices qualify – this is more for specific-needs buildings apart from the main business building.)

In basic terms, almost any type of “portable” (non-installed/permanent) assets qualifies. If you are unsure if something you are considering financing applies, you can always ask us.

Here’s another fact you may find interesting: the equipment need not be new - even used equipment and/or vehicles can qualify if they are new to you / your company. (No, you can’t sell yourself equipment and take the Section 179 deduction – you must buy the equipment from an unrelated third-party seller.)

In the end, to ensure that your property qualifies, please reference Publication 946.

US Tax Code Section 179 is a business equipment expense deduction that is provided for small and medium sized businesses (any business acquiring less than $1,050,000 of equipment in a given year qualifies for Section 179). It is used by companies who elect to treat the purchase of qualifying property as an expense rather than a capital expenditure, and provides substantial tax relief.

The Section 179 election, which is made on Form 4562, is for the calendar tax year the property was both purchased and placed into service (Jan 01 – Dec 31). For further details regarding Section 179, contact your local tax advisor or visit www.irs.gov

Click here for the 2009 Section 179 calculator and information on 2009’s limits. Or, if you need it, the 2008 Section 179 Calculator is here and the 2007 Section 179 Calculator is here

For more information about equipment financing programs, business planning tools, and industry resources, Contact Crest Capital.