Electing to
Expense Costs of New Business Assets
Section 179 Deduction Limits Increased for 2007
The tax code allows taxpayers the option of
either depreciating business assets over a specified number of years or of
deducting all or a portion of the purchase cost in the first year the
asset is put into service.
The expense election, commonly referred to as the Section 179
deduction, is made in the year the asset is put into service and is
available no matter when in the year the asset is placed into service.
There are limits to the Section 179 deduction. On a 2007 tax
return, the Section 179 deduction is limited to $125,000, which is an
increase of $17,000 from 2006.
If more than $500,000 of qualifying assets are put into service during
2007, the Section 179 limit is reduced, dollar for dollar, until it
reaches zero when the total investment amount hits $625,000.
Also, the Section 179 deduction is limited to the net income from all
of the taxpayer's trade and business activities, including W-2 wage and
salary income.
If you did not claim the Section 179 deduction in a prior year and it
would have reduced your tax, you can amend that return and claim the
deduction. Similarly, if you claim the Section 179 deduction on a
return, the law allows you to later amend that return to revoke the
election if you so choose. If considering an amended return for a
prior year, if you change the Section 179 election in any year, the
depreciation deductions will change in subsequent years, requiring amended
returns for those years as well.
