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FAQ: Has enhanced Code Sec. 179 been extended for 2010?

The enhanced expensing election under Code Sec. 179 has been extended through December 31, 2010. Under Code Sec. 179, businesses can elect to recover all or part of the cost of qualifying property by deducting (rather than depreciating) the property in the year it is “placed in service,” up to a certain limit.

The Hiring Incentives to Restore Employment (HIRE) Act has raised the dollar limit to $250,000 with a cap of $800,000 for qualified purchases made in tax years beginning after December 31, 2009 and before January 1, 2011 (the same amounts as in effect for 2009). Under the HIRE Act, Code Sec. 179 expensing can be taken until qualified purchases reach $1,050,000 ($800,000 + $250,000).

Note. Although the HIRE Act has extended enhanced expensing under Code Sec. 179, the new law did not extend bonus depreciation. Bonus depreciation expired at the end of 2009.

Expense planning

Code Sec. 179 expensing is keyed to a business’s tax year, so the extension under the HIRE Act applies to purchases made in the tax years after December 31, 2009 and before January 1, 2011. This gives some fiscal year small businesses well into 2011 to take advantage of the Code Sec. 179 expensing extension.

Qualifying property

The allowable amount of the election to expense depreciable property is based on the cost or purchase price. Code Sec. 179 expensing is available for both new and used property. The HIRE Act also provides that off-the-shelf computer software, a popular business purchase, is Code Sec. 179 property.