Timely tax-saving tips and strategies

Tax tip #4   

Section 179 expense election for certain real property

You can elect to deduct as expense certain qualified real property as section 179 property that you placed in service in a tax year beginning in 2010 or 2011. This includes the following real property, as described in section 168(e):

 

• Qualified leasehold improvement property
• Qualified restaurant property
• Qualified retail improvement property

The amount that may be expensed is limited to $250,000 of the maximum section 179 deduction of $500,000 for 2011. The cost of eligible real property includes the cost of real property that couldn’t be expensed in 2010 because it exceeds your business income for 2010 (See Part I, line 11 of form 4562).

Instructions for making the election can be found on the IRS website at http://www.irs.gov/instructions/i4562/ch02.html#d0e439.

The election may be revoked by filing an amended tax return. Once made, however, the revocation is irrevocable.

This provision is one way that our government is attempting to stimulate the economy by encouraging investment in real estate. Unless Congress extends the provision, it’ll no longer be available after this year. In that case, the real property described above will be depreciated over 39 years on the straight-line basis.