- Section 179 - more robust for 2011 deductions (full article here)
- Every Dollar Counts: What Hotels Should Know About Repair & Maintenance (Full article here)
Section 179 Explained
Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It's an incentive created by the U.S. Government to encourage businesses to buy equipment and invest in themselves.
- 2011 Deduction Limit - $500,000 (up from $250k previously). Good on new and used equipment, including new software.
- 2011 Limit on equipment purchases - $2 Million Dollars (up from $800k previously).
- "Bonus" Depreciation - 100% (taken after the $500k deduction limit is reached). Note, bonus depreciation is only for new equipment. This can also be taken by businesses that exceed $2 million in capital equipment purchases.
Repairs and Maintenance - Capital Expenditures vs. Deductible Repairs
Capital expenditures include those for building improvements or other long-term betterments, new equipment, architects' fees - even the cost of defending or perfecting your title to the property. Generally, a capital expenditure either adds an asset or increases the value of an existing one.
According to IRS Code, you must capitalize expenses that: - Substantially prolong useful life (including replacement of deteriorating assets),
- Materially increase value, or
- Adapt the property to a new or difference use
On the other hand, you are allowed to deduct fees and expenses related to routine repairs and maintenance that help maintain the property in efficient operating condition. You can deduct the cost of parts and labor in order to repair or maintain your business assets, provided that this expense does not increase the value of the asset or prolong the useful life of the asset.
Deductible repair and maintenance expenses may include: - Roof repairs
- Replacing lighting
- Resurfacing parking lots
- Replacing doors and windows
- Resurfacing interior or external floors
- Painting (interior or exterior)
- Rekeying locks
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