Most new business equipment can be either depreciated over its useful life or expensed immediately under Internal Revenue Code Section 179. The maximum deduction is based on the following schedule for the date in which the tax year begins. Each 1040, whether Single or Joint, is limited to one maximum. 179 expenses passed through via K-1s from partnerships (1065), Scorps (1120S), or trusts (1041) are limited at the 1040 level to the one maximum amount. A C corp. is able to deduct its own 179 expenses in addition to what is claimed on the 1040s of the owners. This is one of the many ways in which C corps can save thousands of dollars in taxes over Scorps.
The following table is of the Federal maximums. Many states have not matched these amounts and have much smaller allowable deductions. In those cases, it is critical to maintain two sets of depreciation schedules; one for IRS and another for the State. Since the basis of an asset may be different for each tax agency, the gain or loss on its disposal will similarly be different.
Up until recently, the Section 179 election was only allowed on originally filed tax returns. People who overlooked it were not allowed to claim it on amended returns. This new law allows the Section 179 expensing election to be claimed or revoked on amended returns for 2003 through 2010.
Disaster Assistance Property
For 2008 the maximum Section 179 deduction for qualified disaster assistance property is a total of $350,000. The investment limit for Section 179 qualified disaster assistance property is $1,400,000 for 2008.
Generally, the types of business equipment that qualify for this expensing election are the same kind that qualified for the now-defunct Investment Tax Credit. Most movable assets qualify. Permanent structures do not qualify. Business vehicles with a gross vehicle weight over 6,000 pounds qualify for the full Sec. 179, while lighter vehicles have a much lower dollar limit.
The IRS is now using “curb weight” as a definition, but they are defining “curb weight” as the information posted on the driver’s side door of the vehicle when door is open on the end of the door. It is the manufacturer’s description of the vehicle weight as 6000 lbs coming off the manufacturer’s floor.
That Gross Vehicle Weight is still used and allowed if over 6000 pounds GVW, and that appears in a two paragraph IRS internal guidance document. An Internal Revenue Service spokesman in Austin, Texas (Kenneth Vargas) recently responded to an interviewer (Shannon Buggs of the University of
Houston) with the following answers to these important questions:
Q. Kelley’s Blue Book says the Chevrolet Tahoe and Ford Expedition weigh over 6,000 pounds, but the company’s Web site lists them as having curb weights of less than 6,000 pounds. What is a curb weight, and is that the weight the IRS uses to determine whether a vehicle qualifies for the Section 179 deduction?
A. People have to be real careful. There are salesmen out there who are selling SUVs and don’t know the intricacies of the tax law and don’t know what vehicles really qualify for this deduction. For purposes of the definition of a vehicle’s gross vehicle weight, the IRS defines it as the curb weight. This is the weight of the vehicle as received from the manufacturer. That means without passengers or cargo but with all its standard equipment and full fuel, oil and coolant tanks. The IRS will accept as qualifying for the 179 deduction what the manufacturer says is the gross vehicle weight or curb weight. Request that documentation from the manufacturer. Ask the dealer for help on this documentation if it is not self-evident. Gross vehicle weight and curb weight are different from the vehicle’s gross vehicle weight rating, which refers to the weight of the vehicle and its maximum load of cargo and passengers.
To qualify for the deduction, the IRS also accepts gross vehicle weight rating for SUVs, trucks and vans. So, if the vehicle is on a truck chassis and has a gross vehicle weight rating of more than 6,000 pounds, then it qualifies for the 179 deduction. You usually can find that number on the sticker inside the driver’s side door. That information, however, is not in the IRS publications on this issue. It’s mentioned in a two-line sentence in an internal guidance document.