James R. Kay, CPA

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Section 179 Depreciation

Generally, businesses can elect to expense up to $108,000 ($112,000 in 2007) of the cost of equipment, computers, furnishings, and other "non-real estate" type assets purchased and placed in service in 2006.

These assets would normally be capitalized and depreciated over 5 to 10 years.  However, with the proper election, they can be expensed in the year they are purchased and placed in service.

Eligible assets may be new or used.

If the eligible asset is not used more than 50% for business, this special depreciation is not available.

If more than $430,000 ($450,000 in 2007) eligible assets are purchased during the year, this special depreciation is phased out dollar for dollar for the amount over $430,000.

Section 179 depreciation may have to be recaputured as ordinary income if the business use percentage falls below 51% during the depreciation recovery period--usually between 5 and 7 years.

Section 179 Depreciation of SUVs

Only $25,000 of the cost of SUVs may be deducted under Section 179.  The balance of the cost may be claimed thru regular depreciation.  The $25,000 limit is reduced pro-rata if business use is less than 100%.  If business use is not at least 51%, this special depreciation is not available.

The $25,000 limit is per vehicle, subject to the overall Section 179 limit of $108,000 ($112,000 in 2007).

An SUV is generally a passenger vehicle with a gross loaded weight of more than 6,000 pounds.


Caution - Content on this page is general in nature.  More specific rules and limitations may apply to your situation.  Always seek the advice of a tax professional before making important financial decisions.

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