The SCORE 2016 Issue 4 | Page 44

By Bret Curtis

Don ’ t Miss Out on the Benefits of Section 179

If you haven ’ t heard about Section 179 , it ’ s a great way to help restaurant owners minimize their tax liability by taking a deduction for tangible personal property in the year of purchase , rather than taking it over the asset ’ s useful life , which can be five , seven and up to 15 years for certain property in the restaurant industry .

Under the Path Act , you can use Section 179 to deduct up to $ 500,000 of qualifying equipment or qualified restaurant property purchased or financed during the tax year , subject to income limitations , which means you could bring your income down to zero , but you can ’ t take yourself into a loss position with Section 179 deduction . Any disallowed Section 179 can be carried over to the following tax year . The purchases can include business vehicles , computers , restaurant equipment , qualified restaurant property ( building and improvements ) and other qualifying items .
How does this work ?
Here is an example of how Section 179 can help a restaurant . In 2016 , Susan bought a $ 4,000 piece of equipment for her restaurant . Under regular depreciation rules , unless the equipment was eligible for bonus depreciation , she would have to deduct a portion of the purchase price over its fiveyear useful life .
The depreciation deduction schedule for the new equipment looks like this : Year
Depreciation Deduction 2016 $ 800 2017 $ 1,280 2018 $ 768 2019 $ 461 2020 $ 461 2021 $ 230
Under Section 179 rules , Susan could potentially deduct the entire $ 4,000 purchase in year one , rather than having to depreciate the equipment over five years .
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2016 Issue 4 | THE SCORE
What property qualifies ?
Only certain property qualifies . The tangible property you purchase must be used more than 50 percent of the time for business purposes .
For property placed in service after Dec . 31 , 2015 , the act provides that air conditioning and heating units are eligible for Section 179 expensing .
Section 179 can ’ t be used to deduct the cost of land or land improvements such as paved parking areas , inventory , intangible property ( i . e . trademarks , patents or copyrights ) or property outside of the United States .