Business equipment, furniture, and off-the-shelf computer software can be depreciated over several years, or the full cost can be deducted in the year of purchase as a Section 179 expense. Under the American Recovery and Reinvestment Act of 2009 (ARRA), increased Section 179 expense limits set up by the Economic Stimulus Act of 2008 have been extended through 2009. Small businesses may expense up to $250,000 of Section 179 property, with a phaseout threshold of $800,000. Once the purchases exceed $1,050,000, Section 179 expensing is not permitted..

ARRA also extends through 2009 the 50% bonus depreciation provision of the Economic Stimulus Act of 2008. For qualifying property bought and placed in service in 2009, small businesses have the option of depreciating 50% of the adjusted basis of the property, in addition to the usual depreciation that may be claimed for year one. Property expensed under Section 179 is not eligible for bonus depreciation.

You may choose each year whether to depreciate or deduct equipment purchases, and you can expense all or some.

Buy business supplies at the end of a profitable year and accelerate other expenditures like repairs and maintenance.

Mid-Quarter Convention

Maximize your depreciation deduction by planning qualifying purchases before the end of the year. You may also avoid what is known as the "mid-quarter convention," which occurs when more than 40% of your total new property is placed in service during the last 3 months of the tax year. Purchases fully deducted as Section 179 expenses are removed from the mid-quarter convention computation.

Cost Segregation Studies

To maximize your depreciation deductions, consider a cost segregation study. By identifying and pricing the nonstructural items and land improvements separately from your building, it's possible to accelerate depreciation. These items have much shorter depreciable lives than the assigned 39-year life for nonresidential real property. Landscaping, parking lots, decorative fixtures, cabinets, and security equipment are some examples of assets that may need proper classification.