This alert is to inform you of changes the IRS is making regarding the annual election under Section 179 of the Internal Revenue Code (the “Code”), and is often referred to as the “Section 179 election” or the “Code Section 179 election.”

1. McMillan Consulting — Client Alert
Changes To I.R.S. Code Section 179
Summer 2013
Tax Clients,
This alert is to inform you of changes the IRS is making regarding the annual election under Section 179 of the
Internal Revenue Code (the “Code”), and is often referred to as the “Section 179 election” or the “Code Section 179 election.” For 2013 tax returns, the allowable 179 expense election is $500,000. For 2014, the allowable 179 expense election will be reduced to $25,000. This represents a significant decrease in allowable 179
deduction available for you in 2014. This reduction should be taken into consideration for 2013 year-end
planning and budgets for the subsequent 2014 year. Please consult your tax advisor regarding your specific
situation and how you can plan accordingly.
Section 179 Overview
Section 179 deals with the issue that property generally cannot be deducted in the year it is purchased.
Property has to be deducted over its useful lifespan. The 179 deduction allows the taxpayer to deduct the full
cost of property in the year elected. This election is limited to the dollar amount that’s in place for that tax
year.
Over the last few years, Congress has enacted tax bills to stimulate the economy. These tax bills have have
dramatically increased the dollar limit amount. The $500K limit for 2013 is an example of this.
Another Possible Increase
Many tax professionals believe there will be another increase of the $25K limit. If not for 2014, then possibly
2015. Many business owners are unhappy that the Section 179 deduction has reverted back to the lower
limit.
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