Tax Tip-Section 179 Deduction

Updated: Nov 28, 2021



Publication 946, page 16, provides that a taxpayer may qualify for the Section 179 deductions if the property acquired is used in the taxpayer's trade or business. Property acquired by the taxpayer only for the production of income, such as investment property, rental property (if renting property is not your trade or business), and property that produces royalties, does not qualify.


In the case where the property is partially used for business, the taxpayer can elect the Section 179 deduction only if its business use is more than 50% in the year that it is placed in service. If the taxpayer uses the property more than 50% for business, multiply the cost of the property by the percentage of business use and use the resulting business cost to figure the Section 179 deduction.


In addition, if the taxpayer buys qualifying property with cash and a trade-in, its cost for purposes of the Section 179 deduction includes only the cash paid by the taxpayer (Publication 946, page 18), not the trade-in allowance.


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