IRS Code Section 179 Election – Dollar Limit

The dollar limit doesn’t mean the IRS Code Section 179 election can’t be made for property costing more than that amount. For example, if you buy a machine for $600,000 and place it in service in a business in a tax year beginning in 2011, you can elect to immediately deduct $500,000 of its cost for that year. The remainder of the cost ($100,000) qualifies for 100% bonus depreciation. Also, you can make the election for two or more separate assets, as long as the total cost covered by the election doesn’t exceed the dollar limit for that year.

As mentioned above, if the total cost of qualifying property that you place in service during a tax year beginning in 2011 is over $2,000,000 (over $500,000, as adjusted for post-2006 inflation, for a tax year beginning in 2012) (i.e., the phaseout amount), the immediate deduction limit is reduced by that extra amount. For example, if you place in service $2,200,000 of qualifying property in a tax year beginning in 2011, you can make the election for no more than $300,000 of property ($500,000 minus $200,000 [excess of $2,200,000 over $2,000,000]).

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