The extenders law passed in late December did more than increase the amount of Section 179 depreciation expensing for 2015. The law also made changes to the rules that took effect as of January 1, 2016. Here's an overview of some of the modifications.
Maximum expensing amounts made permanent. When you buy machinery, equipment, or furniture for your business, Section 179 lets you take an immediate deduction instead of depreciating the cost over the useful life of the asset. For 2015, the maximum amount you can expense is $500,000 of the cost of qualifying property you placed in service during the year. The $500,000 is reduced (but not below zero) when the cost of the property exceeds $2,000,000.
The extenders law made these amounts permanent. Beginning in 2016, both caps will be adjusted annually for inflation.
Note that the law did not change the requirement that your deduction is limited to the amount of your taxable income for the year. You can still carry unused amounts to future years.
Qualifying property definition expanded. The definition of qualifying property now permanently includes off-the-shelf software and qualified real property such as leasehold, restaurant, and retail property.
For 2015, the maximum Section 179 expense deduction you can elect for qualified real property is $250,000. This expensing cap is eliminated as of January 1, 2016.
In addition, starting in 2016, you can write off the cost of air conditioning and heating units. They're now considered qualifying property.
Got questions about Section 179? Give us a call. We're here to help.
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