Section 179 limited to $25,000 in 2014…does it affect Cost Segregation?

IRS Section 179

First of all…what is Section 179? Section 179 is an IRS tax code allowing businesses to deduct qualifying purchases during the tax year. A qualifying purchase includes equipment and machinery. It also includes real property assets like capital improvements to buildings.

Section 179 limits for 2013 & 2012 were retroactively raised to $500,000 under H.R.8. AKA “American Taxpayer Relief Act of 2012” or the “fiscal cliff” bill. The new limit is actually a reinstatement of the original limits of $25,000, plus an adjustment for inflation.

Section 179 Deduction
Limited to $25,000 in 2014

There are many in the accounting community who believe this new limit in Section 179 negatively impacts cost segregation. Why, I do not know. In fact, it is a boon to cost segregation providers who base their studies on known engineering guidelines. A cost segregation study does not rely on Section 179 at all. In fact, higher limits on the Section 179 deductions reduces the impact from cost segregation. Once the tax-basis for an asset has been deducted or depreciated, applying cost segregation offers no real benefit. That is, of course, other than classifying the asset properly under MACRS. Cost segregation, under MACRS, places the commercial property owner in IRC tax compliance.

I, for one, am grateful Section 179 has been returned to it’s original limit. The application of cost segregation is now even more important to reducing one’s income taxes. You can reduce or temporarily eliminate your income tax burden this year. That is correct. You can get an income tax credit to apply to 2014 or you can amend returns and get an income tax refund.

Would you like to find out how much of an income tax credit or refund you are due? It’s free and no obligation. We make the process simple. Complete our client questionnaire. It is brief, but necessary. We’ll send you a detail benchmark analysis of your facility. Take it to your CPA or tax advisor. Confirm your ability to take advantage of your tax refund. Why wait? Do it today. In about 60 days or so you could experience a cash win-fall!

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