Small Business Tax

Thanks to the Small Business Jobs Act (SBJA) of 2010, qualifying businesses can now expense up to $500,000 of section 179 property for tax years beginning in 2010 and 2011.

For example, if you purchased a computer in 2010, you can deduct the entire cost of the computer, including sales tax, set-up fees, and shipping costs. It does not matter whether you paid cash or financed the computer. Unlike depreciation, however, you must use the asset over 50% of the time for business, and continue to use the asset over 50% during the years the asset would have been depreciated.

If you purchased a computer for $5,000 and use if for business 70% of the time, you can take a Section 179 deduction for $3,500. The remaining $1,500 is not deductible. If you used the computer 40% of the time, then you cannot take a Section 179 deduction. You can, however, depreciate the computer over 5 years based on 40% of the value of the computer ($2,000 spread over 5 years).

Click tax depreciation and section 179 for a complete discussion of section 179 tax deductions.

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