Generally speaking, claiming the section 179 deduction is a great tax
advantage for most taxpayers, as depending on your business income
for the year, you may be eligible to deduct the entire cost of that equipment all in the first year it was purchased. This will lower your adjusted gross income
and could help you qualify for various other deductions
which are limited by your AGI.
The maximum deduction you can claim for a section 179 deduction for the 2007 tax year is $125,000, but you cannot claim more than the taxable income
you earned from your business or trade. If the cost of your business property exceeds your business income for the year, you may take a section 179 credit
up to the amount of your income for the year, and then the balance must be depreciated over the expected life of the property.
As far as the start up costs incurred, you may deduct up to $5,000 in start up costs your first year in business. Your cost of travel and tuition for classes related to your trade would be eligible. Any start up costs that exceed the $5,000 amount must be amortized over a period of 15 years. You do not need to attach an election statement unless you are choosing to entirely amortize your start up costs enitrely.
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