ROR Tax Professionals

Business Tips

Choosing the §179 Expense Deduction:
Take advantage of year-end equipment purchases!

Each year, the IRS allows a business to write off the cost of purchased equipment. For 2009, the maximum amount allowed is $250,000. The equipment can be purchased and placed in service at any time during the tax year. Even if you wait until the last day of the year to purchase and place in service a piece of equipment, you are allowed the full $250,000 deduction.

The $250,000 maximum is reduced dollar-for-dollar if your asset purchases exceed $800,000. This means that if you purchase $1,050,000 of eligible §179 properties during 2009, no deduction is allowed. Another limitation is that the §179 deduction cannot exceed your taxable business income. Business income includes the income from your trade or business plus wages received by you or your spouse, if married filing jointly.

Keeping Good Records

A business owner who keeps good records is able to easily monitor the progress of his or her business. Records can show whether the business is improving, what items are selling, or what changes may be necessary to make it more profitable. Keeping good records can increase any business owner’s chances of success. Records are needed to prepare your financial statements. Income statements and balance sheets are used to prepare your income tax returns. Saving your receipts makes it easy to keep track of which expenses are business-related and which ones are not. Keeping good records also helps you to distinguish between taxable and nontaxable income.

Keeping track of expenses lessens the chance that you’ll forget which expenses need to be deducted when it comes time to prepare your tax return. Any record that supports the information reported on your tax return is a record worth saving. If the IRS audits your tax return, a complete set of records for the year in question will speed up the examination process.

 

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