Let’s hear it for Section 179 of the IRS tax code!
It lets your business deduct the full price of qualifying equipment purchased or financed during the tax year!
Let’s say your proprietorship bought a pickup truck with a gross vehicle weight rating higher than 6,000 pounds and a bed six feet or longer. Assuming you use the pickup 100-percent for business, you can expense the entire $55,000 cost!
Sounds good, but what happens to that expensed amount if you become disabled, retire, or die before the end of its five-year depreciation period?
You’ll find easy-to-understand answers to these questions.
Our fact-filled article can help you in three ways:
1. Why dying is a good thing? We’ll explain it to you here.
No. We don’t want you to make death your strategy. We want you to continue life as a reader of the Tax Reduction Letter. But from a Section 179 tax perspective, your death works out beautifully. There are two reasons for this.
2. If you become disabled, then what will happen? You’ll learn here.
Here’ the bad news: You have to recapture and pay taxes on the excess deductions (generated by the Section 179 deduction), if you become disabled and allow your business-use of the pickup to fall to 50-percent or below (during its five-year depreciable life. And that’s just for starters.
3. Tax impact of retiring.
When you retire, you have precisely the same problem that you’d have if you became disabled. You disable your business involvement with retirement. That makes your pickup truck fail the more-than-50-percent-business-use test. The result? Recapture of the excess benefit using super slow straight-line depreciation.