A taxpayer places a $50,000 5-year recovery period asset in service in 2015. This is the only asset placed in service in 2015. Assuming half-year convention, immediate expensing, and taxable income after all deductions except Section 179 of $5,000, what is the amount of Section 179 immediate expensing?
We have been provided with the following information
A taxpayer places a $50,000 5-year recovery period asset in service in 2015.
This is the only asset placed in service in 2015.
Assuming half-year convention, immediate expensing, and taxable income after all deductions except Section 179 of $5,000,
Explaination on of ‘Section 179’
First of all let us understand meaning of Section 179.An immediate expense deduction that business owners can take for purchases of depreciable business equipment instead of capitalizing and depreciating the asset. The Section 179 expensing method is offered as an incentive for small business owners to grow their businesses with the purchase of new equipment.
Now amount of Section 179 immediate expensing is calculated as follow
| Cost of equipment | $ 50,000 |
| Section 179 Deduction: | 50.000 |
| Bonus Depreciation Deduction: (updated to 50% via PATH Act of 2015 ) |
|
| Normal 1st Year Depreciation: | |
| Total First Year Deduction: | $50,000.00 |
| Cash Savings on your Purchase:(assuming a 35% tax bracket) | $17,500.00 |
| Lowered Cost of Equipment: (after Tax Savings) |
$32,500.00 |
