Taking the Section 179 election allows the taxpayer to elect to deduct the total cost of the property purchased in lieu of depreciating the property over the life value.
Dollar Limit: The total amount allowed to be deducted for property that is placed in service in the 2018 tax year generally cannot be more than $1,000,000. If you have more than one property that was placed in service in the same year, you can allocate the deduction but you still cannot exceed $1,000,000. You DO NOT have to take the full $1,000,000 deduction.
Situations Affecting Dollar Limit: Even though there is a maximum deduction of $1,000,000 certain situations may allow this amount to be increased to an additional dollar limit such as:
- The property you are using the section 179 deduction for costs more than $2,500,000.
- Your business is an enterprise zone business where empowerment zone tax benefits were not extended past 2017.
- You placed a sports utility vehicle in service.
- You are married filing a joint or separate return.
Costs Exceeding $2,500,000: If your property placed in service this year costs more than $2,500,000, you must reduce the dollar amount by the amount of costs that's over $2,500,000. Once this is done, if the property you are using for the 170 deduction is over $3,500,000, you CANNOT take the 179 deduction.
Sport Utility and Certain Other Vehicles: You cannot expense more than $25,000 for any SUV and certain other vehicles placed in service. The $25,000 limit does not apply to the following:
- Any vehicle that can seat more than 9 passengers behind the driver seat.
- Any vehicle that has a cargo area of at least 6 ft in interior length and is not readily accessible from the passenger side.
- Any vehicle with no seating behind driver seat, a fully enclosed driver compartment and no body section that protrudes more than 30 inches ahead of the leading edge of the windshield.
Married Individuals: Figuring the section 179 deduction when married all depends on if you are filing as married filing jointly or separately. If you file jointly, both spouses are treated as one taxpayer in determining the dollar limit, regardless of who purchased what property. If you file separately, both spouses are treated as one taxpayer for the dollar limit as well as including the reduction for costs over $2,500,000. Separate filers must allocate the dollar limit between both spouses to equal 100%. If you do not, it will automatically be 50% each.
For more information, please visit Publication 946.