Section 179 Passes House, Goes to Senate

Congress extended Section 179 for 2014 by a vote of 263-155. The bill has been sent to the Senate.

Section 179 of the tax code allows small businesses to expense the first $500,000 on purchases of qualified equipment, until they pass $2 million. Purchases at levels above $2 million will reduce the expensing allowance dollar-for-dollar, until it reaches zero. The bill also is indexed for inflation so that the expensing level, and phase-out level, will continue to increase over time.

This property is generally limited to tangible, depreciable, personal property, which is acquired by purchase for use in the active conduct of a trade or business. Buildings were not eligible for section 179 deductions prior to the passage of the Small Business Jobs Act of 2010; however, qualified real property may be deducted now.

Finally, 179(b) (3) provides that a taxpayer’s § 179 deduction for any taxable year may not exceed the taxpayer’s aggregate income from the active conduct of trade or business by the taxpayer for that year. If, for example, the taxpayer’s net trade or business income from active conduct of trade or business was $72,500 in 2014, then the taxpayer’s 179 deduction cannot exceed $72,500 for 2014. However, the 179 deduction not allowed for any year because of this limitation can be carried over to the next year.

It is not known at this time how soon the Senate will take up the bill, but there does not seem to be much opposition at this time.