Rex's Wrecks purchased $1,251,000 in new equipment during 2019. Rex wants to use Section 179 to expense the maximum amount of the purchase. If Rex is not using bonus depreciation, how much will Rex get to expense under Section 179 and what will be the adjusted basis of the assets for calculating MACRS depreciation expense?

Question

Darren Roman

Business

13 September, 13:03

Rex's Wrecks purchased $1,251,000 in new equipment during 2019. Rex wants to use Section 179 to expense the maximum amount of the purchase. If Rex is not using bonus depreciation, how much will Rex get to expense under Section 179 and what will be the adjusted basis of the assets for calculating MACRS depreciation expense?

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Paulina Bray · Answer 1

Rex can expense up to $1 million under § 179, and the remaining $251,000 will be the adjusted basis subject to MARCS.

Explanation:

The Tax Cuts and Jobs Act (TCJA) of 2017 increased the maximum amount that could be deducted under § 179 from $500,000 to $1 million.

§ 179 allows businesses to deduct the cost of tangible personal property as an expense instead of applying depreciation methods. It is mostly used by small businesses especially when they purchase new machinery and equipment.

By using § 179 businesses save money since the value of money changes over time, and one dollar saved today is worth more than one dollar saved tomorrow.