Thursday, September 15, 2011

Tax Advantages of Purchasing Property (including Qualified Real Property) for Business Use This Year

Pursuant to Sections 168 and 179 of the Internal Revenue Code, depreciation deductions and expensing deductions will be more generous in 2011 than in 2012 and beyond.  To summarize, for businesses interested in purchasing new equipment or other business propertythis is the year to do so.  Now is the time to buy machinery and equipment before the advantages are set to expire.  You can lock in accelerated deductions by buying qualifying assets this year but that property must also be placed in service before year-end.  Until the end of the year, in addition to tangible personal property, there is expensing allowed for qualified real property under Section 179(f)(1).  This section permits expensing of up to $250,000 this year. 
Qualified real property is:
(A) qualified leasehold improvement property described in Section 168(e)(6),
(B) qualified restaurant property described in Section 168(e)(7), and
(C) qualified retail improvement property described in Section 168(e)(8).
See Section 179(f)(2)(C)
In order to qualify as Qualified real property, the property must be depreciable and acquired for use in the active conduct of a trade or business.  However, the following types of property are not eligible: property used for lodging, property used outside the U.S., property used by governmental units, foreign persons or entities and certain tax-exempt organizations; also exempt are air conditioning or heating units). Section 179(f)(1)(C).

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