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One of the best tax breaks available to manufacturers is the Section 179 deduction, which allows you to take a current deduction on equipment and business vehicles, rather than depreciating it over many years.
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Section 179 Deduction Goes Up for One Year Only
The Economic Stimulus Act of 2008 almost doubles the maximum Section 179 deduction -- but only for the 2008 tax year when the maximum write-off is generally increased to a whopping $250,000 (up from $128,000 before the new law). For 2009 to 2010, the maximum deduction will revert to $125,000 (plus inflation adjustments) unless Congress takes further action.
Under a phase-out rule, a business that buys a great deal of assets that would otherwise qualify for Section 179 deductions can lose part or all of its write-off. Specifically, the maximum Section 179 deduction for an affected business is reduced dollar for dollar by the amount of qualifying assets in excess of a threshold for the year. For tax years beginning in 2008, the phase-out threshold is generally increased to a whopping $800,000 (up from $510,000 before the new law).
The higher threshold means that many more medium-sized businesses will be eligible for Section 179 deductions for tax years beginning in 2008. For 2009 to 2010, however, the phase-out threshold will revert to only $500,000 (plus inflation adjustments) unless Congress acts to extend the higher amount. |
The maximum amount for 2008 is now $250,000 (see box for details). The limit for 2007 was $125,000. In order to qualify for the tax break, you must use the equipment more than 50 percent of the time for business.
Tip: Many business owners are involved in more than one venture. In the case of pass-through entities (partnerships, LLCs, and S corporations), the dollar limitation rules for the Section 179 deduction apply at both the entity level and the owner level. (IRS Regulation 1.179-2) Therefore, advance planning may be necessary to maximize Section 179 deductions at the owner level, which is where the write-offs really count. Consult your tax adviser for details.
There are several restrictions. Contact Tax Specialist Crystal Martin to ensure that you get the maximum equipment deduction allowed in your situation.
If you are interested in learning more about the manufacturing focused, management consultant services offered by Stambaugh Ness, please contact Richard Hogentogler, CPA. You can reach Crystal or Rick at 717-757-6999 or 800-745-8233, or send either of them an email by using the form below. |
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
IRS Circular 230 Notice: To ensure compliance with requirements imposed by the IRS, we inform you that any US tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. |
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