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Take Advantage of Section 179 Before It’s Too Late

As 2011 comes to a close, there’s more to think about than after-Christmas sales and New Year’s resolutions. Business owners, as well as the average individual, have to think about filing taxes. This is especially true for companies that want to take advantage of the IRS’s section 179 deduction.

As explained by section179.org, section 179 is an IRS tax code that “allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income.” The U.S. government created this incentive to encourage businesses to buy equipment and invest in themselves. This deduction is particularly helpful to small and medium businesses. The maximum amount that companies can write off on their 2011 returns is $500,000, and the total amount spent on equipment purchases cannot exceed $2 million in order to qualify for a section 179 deduction for the 2011 tax year. This includes financed or leased equipment. But, of course, there’s a catch.

The opportunity to file for a section 179 deduction expires on Dec. 31, 2011. So, if businesses want to take advantage of it, they have to act fast. Companies that weren’t profitable in 2011 have the option of using the 100% Bonus Depreciation and carrying forward to a year when they do turn a profit. Unlike the section 179 deduction, the Bonus Depreciation only pertains to brand new equipment. It is also helpful to large businesses that spent more than $2 million on new equipment purchases in 2011.

Another plus for small and medium businesses is the fact that they can use section 179 to deduct the cost of equipment leased or purchased and used in previous years, beginning in 2008 and continuing through 2011; however, they must have detailed records of the equipment they leased or purchased and when they put it into use. A key element that some might miss is the stipulation that the equipment was not only leased or purchased but also put into use during the year for which the company is claiming a deduction. So, if a company bought a new copier in 2011 but won’t actually start using it until 2012, that particular piece of equipment would not qualify for a section 179 deduction on the company’s 2011 return.

Companies that are interested in taking advantage of the section 179 deduction can download copies of IRS form 4562 for tax year 2010 — the forms for 2011 are not currently available – fill out part one and then attach them to their 2011 returns. Any business owner who feels uncertain should consult a tax professional.

Small- and medium-business owners could find 2011 ending on a high note, if they act fast and take advantage of the IRS’s section 179 deduction before Dec. 31. But even companies that need an extension can benefit if they submit their requests soon.

Call your IT support team today to learn more about Section 179 and getting new technology into your business.

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