The HIRE Act and capital expenditures

In addition to providing tax breaks for hiring unemployed people, the newly–passed HIRE Act extends the 2008 and 2009 expensing thresholds so that businesses can write off up to $250,000 of certain capital expenditures, subject to a phase–out once expenditures exceed $800,000, in lieu of depreciating those costs over time. Qualifying property is defined as depreciable tangible personal property purchased for use in the active conduct of a trade or business, including “off–the–shelf” computer software placed in service in tax years beginning before 2011.

Although limited to small businesses because of the $800,000 ceiling, the so–called “Section 179” expensing is available for both new and used property. Section 179 expensing is keyed to a business’s tax year rather than the 2010 calendar, so the extension applies to purchases made in tax years beginning after Dec. 31, 2009 and before Jan. 1, 2011, giving some businesses well into 2011 to take advantage of the HIRE Act’s one–year expensing extension.

Mark E. Battersby is a tax and financial writer based in Ardmore, Pa.