Increased Sec. 179 Expense Limits Extended Two Years

The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) increased the maximum amount that can be expensed under Sec. 179 from $25,000 to $100,000 for property placed in service in tax years beginning in 2003, 2004 and 2005. The $100,000 deduction is reduced (but not below zero) by the amount by which the cost of qualifying property placed in service during the tax year exceeds $400,000. The JGTRRA also provided that off-the-shelf computer software placed in service in a tax year beginning in 2003, 2004 and 2005 is qualifying property for purposes of the expensing election.

New Law

AJCA Section 201 extends the increased Sec. 179 expense for property placed in service before 2008. Thus, the maximum dollar amount under Sec. 179 that may be currently expensed continues to be $100,000. This amount is reduced, but not below zero, by the amount by which the cost of qualifying property placed in service during the tax year exceeds $400,000. Off-the-shelf computer software continues to be eligible for Sec. 179.

Notwithstanding this provision, the maximum dollar amount under Sec. 179 for sport utility vehicles (SUVs) is limited to $25,000. An SUV is any four-wheeled vehicle primarily de-signed or that can be used to carry passengers over public streets, roads or highways that is not subject to Sec. 280F and is rated at not more than 14,000 lbs. gross vehicle weight. Certain vehicles are excluded from the reduced Sec. 179 expense (e.g., vehicles with a seating capacity behind the driver of nine persons or more, etc.)

Effective Date

The provision is effective on Oct. 22, 2004. The SUV provision is effective for property placed in service after Oct. 22, 2004.

From Jane Rohrs, Washington, DC