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.