Q:

Subject: Sec 170 deductibility clarification

Kerry, Could you please clarify the first year deductibility under sec 179 of a truck purchased this tax year 2006?  This truck is a Peterbilt Semi and has a GVW far in excess of 6000 lbs.  As I read your letter on Sec. 179 I see that there is a maximum allowance of $430k.  If I understand this correctly, I can purchase a couple of these trucks and take the deduction this year in full.

Any help you can provide will be appreciated.

A:

If you are planning to spend that much money on anything, you absolutely need to be working with a tax professional who can properly guide you.  No information on the internet or from strangers like me can do the proper job for what you need.

You seem to be dangerously misinterpreting the rules for Section 179.  As you can see on my website, the maximum deduction for 2006 is $108,000.  The $430,000 figure comes into play as a phase-out of that $108,000.  If you acquire more than $430,000 of Sec. 179 qualifying assets in the same year, that $108,000 maximum is reduced.

There are ways to avoid that problem, as well as double the annual Section 179 limit through the use of a C corporation.  Any competent tax professional can help you with that kind of plan.

Good luck.

Kerry Kerstetter

Follow-Up:

Thanks for your quick response.  As I finished my request to you, our CPA called and I clarified with him exactly what you mentioned here relative to the $430k limit and he explained how this limit applies.

Thank you again.

 

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/06/2006 03:46:00 PM Send this post: