everything you wanted to know about section 179
DESCRIPTION
A beginner's guide to the Section 179 tax deduction and how you can take advantage of it.TRANSCRIPT
Everything you wanted to know about Section 179
But were afraid to ask
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Presenter: David J. Verno, CPA, CIA Leone, McDonnell & Roberts, PA
• Questions:• Use the GoToWebinar Question tool• [email protected]• [email protected]• twitter.com/DirectCapital hashtag: #DirectCapital
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Legal Stuff
The information included in this presentation is an overview of Section 179 of the Internal Revenue Tax Code and does not constitute tax advice as every organization or individual has unique circumstances. You should contact your tax advisor for information on how Section 179 applies to your business.
David Verno and Leone, Roberts & McDonnell, PA are not associated with Direct Capital.
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Participant Poll
How much do you know about Section 179?
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What is Section 179?
•Allows for current deduction of equipment•Tangible “personal” property is eligible•Deduct cost of mixed use equipment (>50% business use)
•Not all equipment is eligible•Deductions Limit
• $250,000•Equipment cost limit
• $800,000
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Who Qualifies for Section 179?
•Virtually all businesses•The business legal structure matters
• $250k limit is limited at individual level• Makes a difference if you have multiple
businesses• No carryover
•Being married matters
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Where Can Section 179 Be Used?
•Eligible equipment to be used in US•Special Areas
• Enterprise Zone & Renewal Community Businesses
• Disaster Assistance Property
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10:59:42
When Can Section 179 Be Used?
•Deductions can be used in the same year equipment is purchased•American Recovery and Reinvestment Act extends increased deduction•Financed equipment can be deducted in full in year purchased•Beware if business use drops below 50%•Election to take 179 can be revoked
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29 Dayshh:mm:ssSection 179 Countdown:10:59:28
Why Use Section 179?•Significant impact on taxable income•Example $50,000 eligible equipment purchase
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Tax paid using normal depreciation on a $50,000 equipment purchase
Taxable Income $200,000
Deduction with 20% depreciation $10,000
Taxable Income after depreciation $190,000
Taxes owed (assuming 35% tax bracket) $66,500
Tax paid using Section 179 on a $50,000 equipment purchase
Taxable Income $200,000
Deduction with 20% depreciation $50,000
Taxable Income after depreciation $150,000
Taxes owed (assuming 35% tax bracket) $52,500$14,000 Tax Savings
Other small business incentives
•Bonus Depreciation•Vehicle Depreciation Benefits•Net Operating Loss Carry Back
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Vehicles – Two Categories to Consider
• First – Any vehicle used in a business that would not be considered a traditional passenger vehicle. Purchases of these traditional business vehicles fall under normal Section 179 guidelines
• Second – Any type of sport utility vehicle that is greater than 6,000 pounds but not more than 14,000 pounds of gross vehicle weight.
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How do you elect the deduction?
• You elect to take the section 179 deduction by completing Part I of Form 4562.
• As with all tax records, it is important to keep Section 179 related documentation that shows how you acquired the property, the person you acquired it from and when you placed it into service
• There are different rules for calculating deductions if you are married filing individually and depending on whether your business is a Partnership , S Corporation or other corporate entity.
• Be aware that Estates and trusts cannot elect the section 179 deduction.
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How Much Can You Deduct?
• The economic stimulus act boosted the allowed deduction from $125,000 to $250,000. The incentives are designed to benefit small and medium sized businesses as there is a cap of $800,000 on the cost of equipment purchased. For every dollar spent on equipment above $800,000 the amount of the deduction is reduced by a dollar.
• For example, if equipment is purchased for $825,000 the business can only deduct $225,000 from their gross income ($825,000 - $800,000 = $25,000, then $250,000 - $25,000 = $225,000).
• The amount of this deduction is not based on the number of days this equipment has been in service. So it’s never too late! You are entitled to the $250,000 deduction as long as you buy the equipment by December 31st.
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Special Savings Offer
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Questions?• Use the GoToWebinar question tool• twitter.com/DirectCapital hashtag: #DirectCapital• [email protected]• [email protected]
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• About Leone, McDonnell & Roberts, PA: A full service accounting firm providing complete tax, auditing and accounting services to clients throughout New England. www.lmrpa.com
• About Direct Capital: Founded in 1993, Portsmouth, NH. Direct capital’s mission is to provide simple, fast, cost effective solutions to help businesses acquired the financing they need to succeed . www.DirectCapital.com. Find us also on Facebook and Twitter.
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