Related topics

Audit Advisor Validations

Reviewing Assets for Tax Compliance

Section 179 Threshold Amounts

Section 179 Limits for Enterprise Zone Property

Section 179 Dollar Limit

The Audit Advisor determines if the Section 179 expense taken in a taxable year exceeds the dollar limit for that year.

Issue

You can claim a Section 179 deduction each year subject to certain dollar limits. The dollar limits are based on published IRS figures which are indexed for inflation. The limit is increased for assets placed-in-service in enterprise zones, if applicable, and adjusted after applying a phase-out calculation. The limits are applied across all assets placed in service for the fiscal year.

The published IRS dollar limit for the fiscal year is $<limit + calculated zone amt>.

You have claimed $<total 179 amount> in Section 179 deductions.

Resolution

You have exceeded the maximum Section 179 deduction allowed for the fiscal year. After applying the phase-out rules the dollar limit for this company is $<calculate based off updated dollar limit and threshold limit>.

The system has created a group of all assets claiming a Section 179 deduction that were placed in service during the fiscal year. You should review the list of assets and reduce the total Section 179 claimed by $<calculated>. To complete this analysis, run the Tax Expense Report for the selected year using the group created by the system. Once the Section 179 claimed has been reduced to the appropriate limit you must recalculate depreciation for the fiscal year end.

Note: This Section 179 review does not apply to companies in a consolidated group. Separate limits and rules apply consolidated groups. Check with your tax advisor for more information.

If you have exceeded the Section 179 dollar limitation on all assets placed in service in the fiscal year, you must reduce the Section 179 deduction for one or more assets and recalculate depreciation. The Tax Expense report shows the Section 179 deduction for each asset placed in service in the fiscal year and the total Section 179 deduction for all assets.

  1. Run the Tax Expense report for the group of assets created by the Audit Advisor. The group is named AA-179 XXX-MM/YY, where XXX represents the book and MM/YY is the year end selected in the Audit Advisor window.
  1. Reduce the Section 179 deduction for one or more assets in the group so that the total Section 179 deduction does not exceed the limit for the fiscal year.
  2. Reduce the amount of Section 179 claimed on real property, if necessary.
  3. Recalculate depreciation for the group of assets for the fiscal year-end.