Section 179 Limits for 2010 and 2011

The Section 179 expensing limits have been increased for 2010 and 2011.  A Section 179 election allows businesses to elect to expense asset purchases in the year of the purchase, rather than depreciating those assets over a period of years.  For both 2010 and 2011, businesses can elect to expense up to $500,000 of assets in any one year.  (NOTE:  watch legislation this month to see if anything happens with the 2011 limits.)

Section 179 does not apply to owners of residential rental property.  However, rental owners can take advantage of "bonus depreciation," a special election to expense 50% of the cost of an asset and depreciate the remaining 50%.  Bonus depreciation is an option available to businesses, as well.  In some cases, a business may not want to take a Section 179 expense, and instead take bonus depreciation.

Iowa taxpayers should keep in mind that Iowa does not follow along with federal Section 179 rules or with federal bonus depreciation.  Iowa only allows Section 179 expensing of up to $133,000, and does not honor bonus depreciation at all.  This means an Iowa business or rental property owner could very easily have to track multiple depreciation schedules and basis information.