Q-1:

Subject: Looking for Section 179 2007 Number

 

Dear Mr. Kerstetter:

 

I am interested in finding the upper dollar limit for 2007 Section 179 property. In 2005 the upper limit was $525,000 and in 2006 it was $535,000 -- do you know the limit for 2007?  I understand that presently the rules change for 179 in 2008 and upper limit will be $200,000 (b/c max section 179 deduction drops back to $25,000). Thanks for your help, I saw your article on the web in looking for a source for this number. I had no luck in IRS sources. Thanks in advance for any help.

 

Regards,

A-1:

Your info is out of date.  A tax law was passed last year extending the fall-back in Sec 179 amounts to 2010.  I have had this on my website since the day that law was enacted.
 
In regard to the phase-out, check the numbers at the bottom of the above referenced page.  For 2007, it starts at  $450,000 and goes until $562,000, with the $112,000 maximum deduction allowed for 2007.

These numbers will be adjusted upwards for 2008 and 2009 based on the official cost of living calculations, before dropping in 2010 if our rulers don't extend it again.

Good luck.  I hope this helps.

Kerry Kerstetter

Q-2:

 Dear Mr. Kertstetter:

Thanks so much for writing and the information this is what I was looking for. Especially thanks for updating  my old information -- good to hear there was an extension passed. Thanks so much again!!

Just as an FYI. What was confusing me was the Year 2006 max amount. See paragraphs from IRS pub 946 below, which I just copied and pasted off of www.irs.gov:

"Dollar Limits
The total amount you can elect to deduct under section 179 for most property placed in service in 2005 generally cannot be more than $105,000 ($108,000 in 2006). If you acquire and place in service more than one item of qualifying property during the year, you can allocate the section 179 deduction among the items in any way, as long as the total deduction is not more than $105,000. You do not have to claim the full $105,000.

Reduced dollar limit for cost exceeding $420,000.   If the cost of your qualifying section 179 property placed in service in a year is more than $420,000 ($430,000 in 2006), you generally must reduce the dollar limit (but not below zero) by the amount of cost over $420,000. If the cost of your section 179 property placed in service during 2005 is $525,000 ($535,000 in 2006) or more, you cannot take a section 179 deduction."

In 2005 the max deduction was $105,000 -- with a dollar for dollar reduction in that amount above $420,000.  This means that you run out of deduction at 420+105 = $525,000 (which is the figure in the IRS text).

In 2006, the max deduction is given as $108,000 and the phase out starts at $430,000. From that one would think that the top-end number is 430+108 = $538,000. However, in the IRS pub you see the number is $535,000 ???

Your top-end number for 2007 makes sense (450+112 = $562,000), but is it the REAL number ??

Do you have any insight on the 2006 number and the source for your 2007 number? Perhaps the 2005 number is a typo (smile)?

Thanks so much!!

Regards,

A-2:

That $535,000 figure is either a typo or a reflection of the quality of the basic math skills of IRS employees.

The numbers on my page are accurate and obviously more reliable than those in the IRS publications.

Kerry

Follow-Up:

Hi Kerry!

 

Being a state employee of NC (university professor) I didn't want to make a comment about government workers (smile) -- but I assumed that it was a typo/error of some sort. It only makes sense that once you run out of dollar-for-dollar reduction (i.e. it goes to zero) then you have hit to top-end. But, one never knows what goes through lawmakers, lawyers and accountants minds sometimes (I can say that b/c I have several in my family -smile). Thanks so much for your info and good cheer. It has been my pleasure, and if there is anything that I can ever do for you please do not hesitate to write. Thanks again!

Regards,

 

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/19/2007 06:26:00 PM Send this post: