The Section 179 expense deduction is $500,000 (for tax year beginning 2010) plus 50% bonus depreciation.

Many business owners may not know that $1 out leases can qualify for a tax break.  Under IRC section 179, business taxpayers may now generally elect to take an outright deduction of up to $500,000 (up from $250k) of the cost of equipment placed into service during a tax year.  For the 2010 tax year, there is less than 2 months left to qualify.

If the aggregate cost of qualifying equipment, such as a telecom system or upgrade, placed into service during the tax year is greater than $2 Million (up from $800k), then the deduction is reduced by $1 for each dollar by which the aggregate cost exceeds $2 Million.

For qualifying assets, the cost of which has not been deducted under Section 179, the remaining cost of the equipment is then depreciable in accordance with the ordinary tax depreciation rules.

For example, if a taxpayer places only 2 pieces of equipment in service in a tax year, each having a cost of $275,000, and each having a MACRS recovery period of 5 years, the maximum Section 179 deductions in the first year would be:

Cost of Equipment...............$550,000

Sec 179 Deduction...............$500,000

50% Bonus Deduction.........$25,000

20% MACRS Depreciation...$5,000

Total 1st yr Deduction/
Depreciation            ...............$530,000

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