Are there any limits on the total amount that can be deducted under Section 179 for a single tax year?
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Yes, there are specific limits on the total amount that can be deducted under Section 179 for a single tax year. For tax year 2025, the following rules and limitations apply:
1. Dollar Limitation
- The maximum aggregate cost of Section 179 property that a taxpayer may elect to expense for any taxable year is $1,250,000. This is the cap on the total amount that can be deducted under Section 179 for a single tax year, regardless of how many assets are placed in service.
2. Phase-Out Threshold
- The $1,250,000 limit is reduced (but not below zero) by the amount by which the cost of Section 179 property placed in service during the taxable year exceeds $3,130,000. This means if a taxpayer places more than $3,130,000 of Section 179 property in service in 2025, the maximum deduction is reduced dollar-for-dollar by the excess. If the total placed-in-service cost is $4,380,000 or more, no Section 179 deduction is allowed for that year.
3. Business Income Limitation
- The amount of Section 179 deduction allowed for any taxable year cannot exceed the aggregate amount of taxable income derived from the active conduct of any trade or business during the year. Any amount disallowed because of this limitation can be carried forward to future years.
4. Special Limit for SUVs
- For certain sport utility vehicles (SUVs), the maximum cost that may be expensed under Section 179 is $31,300 for 2025. This applies to vehicles with a gross vehicle weight rating (GVWR) over 6,000 pounds but not more than 14,000 pounds, and which are not otherwise excluded.
5. Other Considerations
- Estates and trusts are not eligible for the Section 179 deduction.
- The Section 179 deduction is not available for property acquired from related parties or by inheritance/gift.
- The deduction must be claimed in the year the property is placed in service, and the election is made on the tax return for that year.
6. Inflation Adjustments
- The dollar limits and phase-out thresholds are indexed for inflation. The amounts above reflect the inflation-adjusted values for tax year 2025.
7. Summary Table for 2025:
In summary, the total amount that can be deducted under Section 179 for a single tax year is subject to a maximum dollar limit, a phase-out threshold, a business income limitation, and a special limit for certain vehicles, all of which must be considered when calculating the allowable deduction for 2025.
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