Section 179 of the tax code lets you immediately take deductions for business furnishings and equipment you buy, or acquire on trade through your exchange, and place in service in a year. Otherwise such items would have to be depreciated over several years.

Computers, carpeting, copiers, desks—just about every (tangible property) item you can depreciate except real estate—is eligible for the expensing deduction.

And 99 times out of 100 you should take advantage of it: the faster you write off the purchase, the quicker you get some of your cost back from the government.

The expensing option is especially useful for purchases in the last three months of the year. If such last-quarter purchases exceed 40% of total purchases, you’d be forced to use the mid-quarter convention if you depreciate them.

This means that instead of getting a 20% depreciation deduction for a computer you buy, you’d get only 5%. But if you expense it, you can deduct it fully and not worry about a reduced depreciation deduction.

But at times it may not pay to use the expensing option. If you’re in a low tax bracket now and expect income to increase in future years, you may be better off taking depreciation, which will postpone your write-offs to the years when the deduction will be worth more to you.

Code Section 179 is advantageous for small businesses, because without it business assets would have to be capitalized and depreciated over a five to seven year period, rather than written off in the year of purchase.

Obviously, an immediate tax write-off is preferable to a five to seven year write-off since money has “time value.” If you are considering investment in new business assets, you should contact your CPA for current information on deductions for business equipment, as the base level has been increased significantly.

The new economic stimulus package provides enhanced Sec. 179 deductions:
DEDUCTIONS

For current information on IRS Section 179 see IRS.
IRS

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