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News & Announcements

September 8, 2008

The Return of Bonus Depreciation and Increased Section 179 Expense

by Joe Babb

Tupelo, MS

Only a few months remain in 2008, but small business owners considering a large equipment purchase should think about making the purchase in 2008.

The dollar limitation for property that can be written off via Section 179 increases from $125,000.00 in 2007 to $250,000.00 in 2008.  On January 1, 2009, the limit will scale back down to $125,000.00, adjusted for inflation.  Section 179 does not apply to real estate  is limited by the size of the business, and is applicable only to th extent of any profit incurred.  Any remaining unused Section 179 expense is carried over and applied against any profits in future years.

The legislation also allows for an additional 50% deduction for depreciation on fixed assets purchased in 2008.  In other words, 50% of the purchase price of a fixed asset can be immediately written off, while the remaining cost of the asset is depreciated over its normal statutory rate.  The advantage of this provision over Section 179 is that there are fewer limitations, and businesses can receive the deduction even if they are in a loss position.

Both provisions are presently only applicable to 2008.