Electing to Expense the Cost of Your Business Assets

Main Menu

Tax Tips Small Business

Section 179 deduction limits increase

The IRS allows taxpayers the option of either depreciating some assets over a specified number of years or deducting all or a portion of the cost in one year. The expense election, commonly referred to as the Section 179 deduction, is made in the year the asset is placed in service. The benefit is a large deduction in the current year that is not reduced even if the asset is placed in service late in the tax year.

Small Business Quick Tip

The Social Security wage base increases to $102,000 in 2008, up from $97,500 for 2007. This means that you are no longer required to withhold social security tax for employees after meeting this threshold. However, you are required to withhold Medicare taxes regardless of the amount of wages paid.

Electing to Expense the Cost of Your Business Assets

Section 179 deduction limits increase

The IRS allows taxpayers the option of either depreciating some assets over a specified number of years or deducting all or a portion of the cost in one year. The expense election, commonly referred to as the Section 179 deduction, is made in the year the asset is placed in service. The benefit is a large deduction in the current year that is not reduced even if the asset is placed in service late in the tax year.
The Section 179 deduction is not without other limits, however. For example, the most you are allowed to expense in 2007 is $125,000, a $17,000 increase over last year. If more than $500,000 of qualifying property is placed in service, the Section 179 deduction is reduced dollar for dollar until the total investment reaches $625,000, resulting in a deduction of zero. Additionally, your Section 179 deduction is limited to your taxable income from all your active trades or businesses, including wage income reported to you or your spouse on Form W-2.

If you elect to use the Section 179 deduction, you may change your mind and revoke the election. Conversely, if you do not make the election in the year the property was placed in service, you may amend your return and claim the deduction.

< Prev		Next >

Wednesday, 03 December 2008

What is an Enrolled Agent and why should I care?

Click Here to find out

Tax Tips Personal

Money for College

Are scholarships taxable?

Many college students receive scholarships or fellowships to help pay for their education. If you are in college and received a scholarship or fellowship grant, there are a few key points to keep in mind. Qualified scholarships and fellowships are treated as tax-free and not included in taxable income if all of the following conditions are met:

Personal Quick Tip

If you tax refund was too high or too low, adjust your withholding so it doesn't happen again next year. You can file a revised W-4 with your employer at any time to increase or decrease the number of exemptions you claim. The more exemptions you claim, the less tax your employer withholds from your wages, resulting in a smaller refund. Decreasing the number of exemptions results in more withholding and a larger refund.