Imagine an IRS rule that allows you to immediately deduct the cost of almost any asset you need, regardless of the asset’s useful life.
- What assets do you need? (not want! need!)
- Which of the assets qualify under Section 179 (Read the IRS instructions carefully.)
- Check out your income – does it look like you’re going to be profitable in 2012?
- Check out your cash flow – do you have the money to buy the assets before year-end?
For example, suppose you have your eyes on a new MacBook. With printer, software, sales tax, etc., it would cost you $3000. You look it up in the instructions and BINGO! It qualifies! You expect to have $5,000 income this year, and you have sufficient cash to pay for it. Go for it! Your taxable income will drop from $5,000 to $2,000, and in all likelihood your business’s income tax will drop by 60%.
One more thing: Remember that “deductible” items usually lower your taxes – in effect, the government subsidizes a portion of them. However, “deductible” doesn’t mean free. Never spend money on assets that you don’t need.
Now you see why Section 179 is my very favorite section of the tax code.