IRS Section 179 Limits for 2013
Business owners across the United States breathed a sigh of relief recently as details of the American Taxpayer Relief Act of 2012 became clear. At the center of worries for business owners were the expiring Section 179 limits which allow businesses to immediately depreciate qualifying assets in the year they are placed in service, rather than over several years. In 2011, the provision allowed for up to $500,000 in immediate write-offs for assets placed in service during the year, but that number was set to drop to only $125,000 for 2012 and 2013. The uncertainty of Section 179’s future forced many small business owners to hold off on major equipment purchases until details of the “fiscal cliff deal” emerged.
The American Taxpayer Relief Act of 2012 reestablished the previous limits of $500,000 for 2012 and 2013 tax years. The amount of qualifying assets that can be placed in service before a reduction in the limitation has also been increased from $500,000 in 2012 and $200,000 in 2013 to $2,000,000 in both years. The definition of “qualifying assets” will continue to include computer software in 2013… at least for one more year.
IRS Section 179- Qualifying Assets:
- Machinery and Equipment Purchased for Business Use
- “Off-the-Shelf” Computer Software
- Business Vehicles Weighing More Than 6,000 lbs
- Property contained in or attached to a building (other than structural components), such as refrigerators, grocery store counters, office equipment, printing presses, testing equipment, and signs.
- Livestock, including horses, cattle, hogs, sheep, goats, and mink and other furbearing animals
While the extension of Section 179 limitations put a smile on the faces of business owners across the country, the news may also signify a boom coming to the equipment leasing industry. With over 80% of US based businesses leasing some or all of their capital equipment, equipment financing options have become an important part of the Section 179 puzzle. By entering into an equipment leasing or financing arrangement, the business owner can still utilize the immediate Section 179 write-offs while stretching payments out over 36 to 60-months.
IRS Section 179D (Deduction for Energy Efficient Commercial Buildings) will remain unchanged until 2014 and should provide a nice boost to the LED lighting industry. The provision allows for up to a $1.80/sq ft deduction for energy efficient commercial properties that achieve at least a 50% reduction in energy consumption, with the following limits:
- HVAC: $0.60 per square foot
- Interior Lighting: $0.60 per square foot
- Building envelope: $0.60 per square foot
Section 179D provisions apply to new commercial and municipal buildings, retrofitted buildings, and LEED certified properties.