Nov 19, 2009

Section 179--A Small Business Owner's Best Friend (at Taxtime)

If you learn only one number in the tax code, it should be Section 179. This humble piece of the tax code is one of the greatest tax boons ever for small business owners. Section 179 doesn't increase the total amount you can deduct, but it allows you to get your entire depreciation deduction in one year, rather than taking it a little at a time over the term of an asset's useful life--which can be up to 39 years. To qualify, the property must be long-term, tangible personal property that you purchase and then use in your business over 50% of the time.
In an effort to jumpstart the economy, the Section 179 limit was increased to a whopping $250,000 for 2009 (from $128,000 in 2007). It is scheduled to go back down to $133,000 in 2010 and then $25,000 in 2011. So if you're planning on purchasing more than $25,000 of eligible property for your business and want to deduct the cost in one year, you should make your purchase before 2011.

See Deduct It! by Stephen Fishman (Nolo) for more information on small business tax deductions.