Higher Expensing Limits Extended By HIRE Act of 2010

by Lee Reams in Breaking News

A new tax change has been initiated that will change the rules for Sec. 179 expenses. This article will cover these changes and clarify "qualifying property" for purposes of the expensing election.

Generally, taxpayers can elect under Sec. 179 to expense the cost of business machinery and equipment placed in service during the tax year, instead of depreciating it over a number of years. As part of the stimulus legislation, these amounts had been temporarily increased for 2008 and 2009 and were scheduled to return to normal levels in 2010.

The HIRE Act of 2010 has extended the higher amounts for one additional year (through 2010). Thus, for tax years beginning in 2008 through 2010, the maximum amount that can be expensed each year is $250,000. The maximum deductible expense is reduced (i.e., phased out, but not below zero) by the amount by which the cost of property placed in service during the tax year exceeds $800,000.

Qualifying property for purposes of the expensing election is depreciable, tangible personal property purchased for use in the active conduct of a trade or business, including “off-the-shelf” computer software placed in service in tax years beginning before 2011.

Barring any additional legislation, the maximum amount will drop approximately to $134,000 in 2011.