EQUIPMENT LEASING BENEFITS FOR 2009

January 30th, 2009 Posted in EQUIPMENT LEASING

IRS SECTION 179 

Business owners who acquire equipment including machinery, computers, and other tangible goods, usually prefer a substantial deduction in a single tax year, rather than a little at a time over a number of years. This accelerated deduction is known by its section in the tax code: a Section 179 deduction. The 2009 law extends the amount of qualified property that a business can expense under Section 179 to $250,000.This incentive is for equipment placed in service by December 31, 2009 and is designed for small companies, so the deduction phases out when a business purchases more than $800,000 in one year. (Companies cannot write off more than their taxable income).

Definitions

Depreciation

Depreciation is the annual deduction that allows you to recover the cost or other basis of your business or investment property over a certain number of years. Depreciation starts when you first use the property in your business or for the production of income. It ends when you either take the property out of service, deduct all your depreciable cost or basis, or no longer use the property in your business or for the production of income.

Generally, you can depreciate:

• Tangible property such as buildings, machinery, vehicles, furniture, and equipment; and
• Intangible property such as patents, copyrights, and computer software.

Exception.   You cannot depreciate land.

Section 179 Property

Section 179 property is property that you acquire by purchase for use in the active conduct of your trade or business, and is one of the following.

• Tangible personal property.
• Other tangible property (except buildings and their structural components) used as:
  1. An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services;
  2. A research facility used in connection with any of the activities in (1) above; or
  3. A facility used in connection with any of the activities in (1) above for the bulk storage of fungible commodities.
• Single purpose agricultural (livestock) or horticultural structures.
• Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum.
• Off-the-shelf computer software.

Section 179 property does not include the following.

• Property held for investment (section 212 property).
• Property used mainly outside the United States (except for property described in section 168(g)(4)).
• Property used mainly to furnish lodging or in connection with the furnishing of lodging (except as provided in section 50(b)(2)).
• Property used by a tax-exempt organization (other than a section 521 farmers’ cooperative) unless the property is used mainly in a taxable unrelated trade or business.
• Property used by a governmental unit or foreign person or entity (except for property used under a lease with a term of less than 6 months).
• Air conditioning or heating units.

See the instructions for Part I and Pub. 946.

Amortization

Amortization is similar to the straight line method of depreciation in that an annual deduction is allowed to recover certain costs over a fixed time period. You can amortize such items as the costs of starting a business, goodwill, and certain other intangibles. See the instructions for Part VI.

Listed Property

Listed property generally includes the following.

• Passenger automobiles weighing 6,000 pounds or less. See Limits for passenger automobiles on page 10.
• Any other property used for transportation if the nature of the property lends itself to personal use, such as motorcycles, pick-up trucks, sport utility vehicles, etc.
• Any property used for entertainment or recreational purposes (such as photographic, phonographic, communication, and video recording equipment).
• Cellular telephones (or other similar telecommunications equipment).
• Computers or peripheral equipment.

Exception.   Listed property does not include:

1. Photographic, phonographic, communication, or video equipment used exclusively in a taxpayer’s trade or business or at the taxpayer’s regular business establishment;
2. Any computer or peripheral equipment used exclusively at a regular business establishment and owned or leased by the person operating the establishment; or
3. An ambulance, hearse, or vehicle used for transporting persons or property for compensation or hire.

   For purposes of the exceptions above, a portion of the taxpayer’s home is treated as a regular business establishment only if that portion meets the requirements for deducting expenses attributable to the business use of a home. However, for any property listed in (1) above, the regular business establishment of an employee is his or her employer’s regular business establishment.

Please visit http://www.irs.gov/ for more detailed information.

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