Additional First-Year Depreciation

Tax law provision under Section 179 of the Internal Revenue Code permitting a certain amount of depreciable business personal property purchased each year to be expensed rather than depreciated. Buildings are not eligible. The limit of depreciation was $108,000 in 2006, was adjusted for inflation in 2007, then fell to $25,000 per year in 2008, without an inflation adjustment. The investment limit to claim this was $430,000 in 2006, was adjusted for inflation in 2007, then fell to $200,000 per year in 2008 without an inflation adjustment. The amount is phased out, dollar for dollar, when purchases exceed $200,000 in a year. The expense deduction is limited to the net income the taxpayer earns from the active conduct of all trades or businesses during the year.


Example: Barbara is a real estate broker. She bought a $4,000 computer to assist with her business; she may expense the cost in the year purchased, rather than depreciate the equipment.

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