President scheduled to sign legislation to extend increased Section 179 limits through 2010

President Obama is scheduled to sign the Hiring Incentives to Restore Employment (HIRE) Act tomorrow.  It contains a variety of provisions to encourage employers to add employees to their payrolls and to invest in equipment.  The provision we are noting today relates to Section 179.

CODE SEC. 179 EXPENSING

For 2009, the maximum Code Sec.179 deduction was $250,000 and the phase-out limit for qualifying property purchased during the year began at $800,000. First introduced in 2008, enhanced Code Sec. 179 expensing expired on December 31, 2009. Without legislation, Code Sec. 179 expensing for 2010 is limited to $125,000, with a $500,000 cap (both adjusted for inflation). The HIRE Act extends enhanced Code Sec. 179 expensing, at the $250,000/$800,000 threshold levels, through December 31, 2010.

Unlike bonus depreciation, Code Sec. 179 expensing is available on both new and used property. Also unlike bonus depreciation, the $800,000 qualifying property ceiling for Code Sec. 179 property effectively limits expensing to small businesses. Finally, Code Sec. 179 is keyed to the business’s tax year rather than the 2010 calendar. The extension under the bill applies to purchases made in tax years beginning after December 31, 2009 and before January 1, 2011.

The HIRE Act does not extend bonus depreciation.