Question

Various equipment was purchased and placed in service this year in the amount of $3,000,000. Taxable income before the 179 deduction was $400,000, Indicate the amount of deduction under the Section 179 election, $570,000 a b. No 179 election is allowed c. $1,020,000 $450,000 d. $2,550,000

Answer 1

Amount of deduction under the Section 179 election

a. $570,000

Explanation: (Law)

A company can now expense up to $1,020,000 deduction on new or used equipment with Section 179.

The phase-out purchase limit is now $2,550,000. This $2,550,000 phase-out limit means that your deductions start to decrease dollar-for-dollar after you exceed the new limit.

Computation:-

Various equipment purchased this year	$3,000,000
Less: Phase out limit	$2,550,000
Deduction to be reduced by	$450,000
Maximum Deduction as per Section 179	$1,020,000
Less: Reduction (calculated above)	$450,000
Net Amount of deduction under Sec 179	$570,000