J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

42.3 First-Year Expensing Deduction

The dollar limit on first-year expensing in 2012 is $139,000. However, Congress may increase this dollar limit for 2012; see the e-Supplement at jklasser.com .

The $139,000 limit is phased out if the cost of qualifying property placed in service during 2012 exceeds $560,000.

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Law Alert

First-Year Expensing Limit Scheduled to Decline for 2013

The first-year expensing limit for 2012 will fall to $25,000 unless Congress intervenes to prevent the reduction.

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Costs eligible for expensing.

You may elect first-year expensing for tangible personal property bought for business use, such as machinery, equipment, or a car, truck or computer, provided the property is acquired from a non-related party. Expensing is not allowed for property held for investment.

To elect the expensing deduction for the cost of qualifying property for 2012, the qualifying property must have been purchased and placed in service in 2012. You may not elect first-year expensing for property purchased before 2012, even if 2012 is the first year you use it for business. For example, if you bought a computer for family use in 2011 and in 2012 you converted it to business use, expensing is not allowed on your 2012 return. For an automobile placed in service in 2012, the maximum expensing deduction is $11,160. The limit is $11,360 for light ...