Qualifying for Quicker Write-offs
It's now easier than ever to accelerate tax deductions on purchases of computers, office furniture, company cars, and the like. Under the IRS's Section 179 rules, companies have long been able to boost cash flow by writing off up to $10,000 worth of such purchases during the year in which they were put into service. But now a sweet deal has gotten even better.
Here's some background: Companies can qualify for the $10,000 deduction only if it won't throw their tax returns into a loss. In the past, if you had reported only $6,000 worth of taxable income and had made up to $10,000 worth of Section 179 purchases, you'd be able to write off as an expense only $6,000 worth, and you'd have to depreciate the rest, explains Tom Ochsenschlager, a partner at the Washington, D.C., office of accounting firm Grant Thornton.
Now the IRS says that any wages or income earned by a business owner during the course of the year, even from another job or a separate business venture, can be applied toward the $10,000 hurdle. For married business owners filing joint tax returns, a spouse's wages or business income also counts. To make the best of Section 179, Ochsenschlager advises companies to time the purchases of eligible property so that $10,000 worth can be listed as an expense each year. And file jointly, if possible. -- Jill Andresky Fraser* * *
For more information on Section 179, request a free copy of Tax Form 4562 from your local IRS office, or call 800-TAX-FORM. "This is the form you'll have to fill out if you're applying for a Section 179 deduction," Tom Ochsenschlager notes, "and the instructions do an excellent job of explaining the logistics."* * *