Section 179 Expense

Taxpayers may elect to expense, within stated limits, all or part of an asset’s cost under Code Section 179. To qualify, the asset must be Section 1245 property that is purchased after December 31. 1981, for use in a trade or business.

There is a maximum dollar limitation for each year. Prior to 1993, the asset’s placed-in-service date was used to determine the limit. Starting in 1993, the taxpayer’s fiscal year, along with the asset’s placed-in-service date, is used.

Qualifying Enterprise Zone property is allowed an additional $35,000 (or the cost of the qualifying property, if less) of Section 179 expense (an additional $20,000 before 2002).

Qualifying New York Liberty Zone property is also allowed an additional $35,000 (or the cost of the qualifying property, if less) of Section 179 expense.

Qualifying Gulf Opportunity Zone property ("GO Zone property") is allowed an additional $100,000 (or the cost of qualifying property, if less). The investment limit for such property is increased by an additional $600,000 (or the cost of qualifying property, if less).

Qualifying Disaster property and Recovery Assistance property are allowed an additional $100,000 (or the cost of qualifying property, if less). The investment limit for such property is increased by an additional $600,000 (or the cost of qualifying property, if less).

In addition, the limit, in 1987 and thereafter, must be reduced dollar for dollar by the amount by which the cost of Section 179 property placed in service during each taxable year exceeds a threshold amount. The threshold amount periodically has been increased and adjusted for inflation (see the third column in the table below). If it is New York Liberty Zone property or Enterprise Zone property, only one-half of the asset’s cost is used when calculating the phaseout.

If the asset is placed in service in

The Section 179 limitation amount is

1982 – 1986

$ 5,000

1987 – 1992

10,000

 

If the taxable year begins in

The Section 179 limitation amount is

The limitation is reduced by the amount by which the cost of Section 179 property exceeds

1993 – 1996

$ 17,500

$200,000

1997

18,000

200,000

1998

18,500

200,000

1999

19,000

200,000

2000

20,000

200,000

2001 – 2002

24,000

200,000

2003

100,000

400,000

2004

102,000

410,000

2005

105,000

420,000

2006

108,000

430,000

2007

125,000

500,000

2008 – 2009

250,000

800,000

2010 – 2013

500,000*

2,000,000

2014 and thereafter

25,000**

200,000**

 

*For years starting in 2010 and 2011, the Small Business Jobs Act of 2010 expanded the definition of Section 179 property to include qualifying real property (certain leasehold improvements, restaurant property, and retail improvement property) and allowed businesses to claim $250,000 of Section 179 expense on it. However, for purposes of the $500,000 limitation mentioned above, no more than $250,000 can be claimed on qualifying real property. The American Taxpayer Relief Act of 2012 extended this definition for property placed in service in 2012 and 2013.

**These amounts will be indexed for inflation.