Reference: IRS Notice 2015-82 and Regulation Sec 1.263(a).
The IRS has conceded that their limit of $500 for immediate expense of equipment, leasehold improvements, etc was too low to be useful to small business. THEY HAVE INCREASED THAT LIMIT TO $2,500 PER ITEM, retroactive to 1/1/2015. Example: A business buys new computers for ten offices at a cost of $2,000 each. The entire $20,000 can be written off as purchased.
Section 179 application: Because the assets are expensed as purchased and NOT capitalized as a fixed asset, they do not “use up” part of the Section 179 limit… currently set at the low-end of $25,000 for 2015. (We’re waiting for Congress to restore this to earlier larger limits).
Overall application example: During 2015, a contractor buys $60,000 of small equipment and a used work truck of $25,000. No one item of the small equipment is over $2,500 of cost. As long as the business has made the election under Regulation 1.263(a) and has a written accounting procedure in place at the beginning of the year stating the election, the business can expense the entire $60,000 of equipment (not treated as fixed assets) and then elect Section 179 treatment for the entire $25,000 of the truck. Total equipment-related deduction in 2015 is $85,000.
Please call if you have questions.
