Farmers and small business owners who are not familiar with Section 179 of the tax code need to do their homework on it now. The first deadline for taking advantage of the most generous provision in the tax code ends Dec. 31, 2010.
The provision allows farmers and small businesses to deduct the full purchase price of qualified capital expenditures up $500,000 during the tax year. So if you buy (or lease) equipment like a tractor or combine before Dec. 31, 2010, you may deduct the full amount (up to $500,000) from your gross income on 2010 taxes.
Obviously, deducting the full cost of the equipment on your taxes can make that equipment a lot less expensive.
How did this generous equipment deduction develop? The Economic Stimulus Act of 2008 included Section 179 with its expanded limits on how much businesses may deduct. Then the Small Business Jobs and Credit Act of 2010 increased the tax provisions for 2010 and 2011. It also extends the first-year 50% depreciation for property purchased and used during the 2010 tax year. This provision does not apply to 2011.
While Section 179 includes 2011, tax codes can change without notice. So farmers will be smart to take advantage of this provision in 2010 and be ready to do so in 2011 should it remain in the tax code. Here’s a link to just one of the many online Web sites to help explain Section 179 http://www.section179.org/