I received a mailing from an American automobile company regarding the Section 179 deduction. The letter expressed some urgency to purchase a vehicle before the end of the year to get a large Section 179 deduction. While this is true, the letter left me with the impression that I needed to take action before December 31, 2016, or the deduction would be lost. What they stated was true. However, it is what was left unstated that concerns me.
For the uninitiated, Section 179 allows a business taxpayer to expense in the current year costs of certain equipment purchased during the year rather than taking depreciation over the life of the asset. Currently businesses purchasing less than $2,000,000 in such assets may expense up to $500,000 of Section 179 deduction on their return. This amount was enacted in January 2016 and is permanent until Congress changes it. Thus, the deduction remains at $500,000 and is indexed for inflation for future years. The deduction must be taken in the year in which the asset is placed into service.