Section 179 and Bonus Depreciation Amounts for 2012 and 2013

As part of the fiscal cliff tax deal passed by Congress on January 1, 2013, the Section 179 limit for 2012 was retroactively increased from $128,000 to $500,000. This means that, if, for example, you purchased $250,000 of property that qualifies for Section 179 treatment in 2012, you may deduct the entire amount in 2012, instead of just $128,000. If you purchase more than $2 million of equipment in any one year, then the amount you can deduct is reduced dollar for dollar. The $500,000 Section 179 limit is scheduled to last until the end of 2013. In 2014, the Section 179 limit is scheduled to go to $25,000.

For 2012 and 2013, bonus depreciation is set at 50%--that is, you may deduct 50% of the cost of property that qualifies in a single year. Unlike the case with Section 179, there is no annual dollar limit on bonus depreciation and you need not use the property at least 51% of the time for business.