BOSTON (CBS) – Normally if you purchase capital equipment for your business, you don’t get to expense the total cost of the equipment the year you buy it.
You depreciate the equipment over its useful life, expensing a portion each year on your tax return, which could be anywhere from three to seven years. Purchase equipment for $50,000 and you would write off $10,000 a year for 5 years.READ MORE: I-Team: Law Passed During Pandemic Protects Nursing Homes From Lawsuits
Congress wrote an exception into the tax code, section 179, to help small businesses which allows them to take a full deduction for some capital equipment.
Tax changes restored section 179 Deductions to its original limits of $25,000.
You cannot use the 179 Deduction for structural changes in a building like new windows but you can still depreciate those items over their useful life.
A window AC unit would be eligible for the 179 Deduction. Property attached to your building, but not a structural component such as ovens or a table saw, would be eligible for the deduction. Things you could take with you if you moved.
If you set up your consulting business and you buy a computer, monitor, software, a scanner, a copier, telephone, and the furniture to put the new equipment on and a back friendly office chair to sit in for $7,000. All of that $7,000 could be written off in one year as long as you had enough income to cover the deduction.
To be eligible for the section 179 Deduction the asset must be used at least 50% for business in the first year it is placed into service. So if your kids are playing games or doing homework on the computer in the evenings you should not take a 100% deduction.READ MORE: Six Flags New England Reopens After More Than 13 Months
Now I doubt if the IRS deduction police are going to pay you a visit but it’s the right thing to do! The IRS does rely on us to do the right thing when we file our taxes.
This deduction is not automatic. The IRS requires you to file form 4562 to get the deduction.
You may also want to get a copy of the IRS publication 946, How to Depreciate Property.
Also the IRS has a help number for businesses, 800-829-4933.
You can hear Dee Lee’s expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m., 3:55 p.m., and 7:55 p.m.MORE NEWS: I-Team: Nora Baston To Be Named New Boston Police Commissioner; Dennis White Challenging Removal
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