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Small business owners who buy or lease (in some cases) equipment can make an election to take an immediate expense deduction for it under Section 179. Otherwise, the property will have to be depreciated over a period of years.

That’s the simple description, but there is actually a whole lot more to the Section 179 deduction. In fact, there is so much to it, that we’re going to go over it in a couple of blog entries.

Today, we cover the basics.

• The Section 179 deduction is taken on Form 4562.
• You can now go back and amend your previous returns if you did not take the Section 179 deduction and it was allowed. (Thank you Rev Proc 2008-54 for that)
• Covered business property:
  Equipment
  Tangible personal property
  Business vehicles with GVW over 6,000 lbs
  Computers
  Off-the-shelf software
  Office furniture
  Office equipment
  Property attached to building that is not a structural component
  Partial business use

The 2011 Section 179 deduction limit is currently $500,000. It is good on both new and used equipment that you purchase. However, if you purchase over $2 mill you will start to phase out on the amount you can deduct.
NOTE: Section 179 deduction is not the Bonus Depreciation. The biggest differences are that the Section 179 deduction can not take you to a loss. And Bonus Depreciation can only be taken on brand new qualifying products first put in service by you. You can take both Section 179 and Bonus Depreciation.

There is a real strategy to taking depreciation the right way with all the choices we have these days. Make sure you’re making the right choices!

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