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You may be able to use the Section 179 deduction on your building if it meets the Qualified Restaurant Property definition . To qualify , more than 50 percent of the building ’ s square footage must be devoted to preparation of and seating for on-premises food consumption .
For example , Prime Restaurant Group buys a building for $ 300,000 . Under old rules , the owner would have to deduct the costs over 39 years at $ 7,692 per year . However , under the definition as a Qualified Restaurant Property , Prime could potentially take a Section 179 deduction for the entire $ 300,000 purchase in year one .
What is the difference between bonus depreciation and Section 179 ?
The biggest difference is that both new and used equipment can qualify for Section 179 , as long as it is new to you . Bonus depreciation covers new equipment only and is useful to very large businesses spending more than the Section 179 limit for the year ( now $ 2,010,000 ). Businesses with a net loss are still qualified to deduct some of the cost of the new equipment and carry forward the loss to future years with bonus depreciation . When you are looking to use these deductions , Section 179 is generally taken first , followed by bonus depreciation unless the business has no taxable profit in the given tax year .
Do vehicles qualify ?
The Section 179 deduction can be used on vehicles , however there are limitations . The full cost of trucks with a gross vehicle weight over 6,000 pounds qualifies for Section 179
deduction . SUVs are limited to $ 25,000 of Section 179 deduction and certain smaller passenger vehicles have a total depreciation deduction limitation of $ 11,060 .
What are the Section 179 limits ?
Taxpayers can immediately deduct up to $ 500,000 of the cost of qualifying assets or the cost of financed purchases up to $ 2 million . Without the Path Act , the Section 179 thresholds would have dropped to $ 25,000 and $ 200,000 , however , beginning in 2016 , the higher limits will be indexed for inflation .
I have passive investors . Is Section 179 a good idea for my restaurant ?
You can claim the deduction for a restaurant in which you are actively involved in the day-to-day operations . For most owners , it ’ s not difficult to prove this . However , if you have outside investors who don ’ t participate in running the business , you may want to think twice about the Section 179 deduction because they may not be eligible to claim it .
How do I take advantage of Section 179 ?
If you have been waiting to make improvements or invest in new equipment , now is the time to meet with your CPA and discuss these projects or purchases to see if they qualify for this great tax break . S
BRET CURTIS , CPA , JD , LLM is a shareholder of Mize Houser & Company P . A ., a full-service accounting firm that provides PayPlus + Accounting and Payroll Solutions for FBS members .
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COMMERCIAL CONTRACT FURNITURE & INSTALLATION
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Judy Ryan Account Specialist
952.358.2630 jryan @ plymold . com
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COACH JON GRUDEN
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THESCORE | 2016 Issue 4