Section 179 Expensing

• Maximum Expensing Limit: $2,500,000 per tax year (for tax years beginning after 12/31/2024)
• Phase-Out Threshold: Begins when total §179 property placed in service exceeds $4,000,000
• Phase-Out Rate: Dollar-for-dollar reduction above $4,000,000
• Minimum Deduction: Cannot be less than $0
• Inflation Indexing: Both $2,500,000 and $4,000,000 indexed for tax years beginning after 2025
• Business Income Limit: Deduction cannot exceed taxable income from active trades or businesses
• Carryforward: Disallowed §179 amounts carry forward indefinitely
• Entity Application: Applies at both entity and owner levels for partnerships and S corporations
• SUV Expensing Cap: $31,300 for qualifying SUVs (6,000–14,000 lbs GVW).
• Controlled Groups: Limits apply on an aggregated basis
• Married Filing Separately: §179 limit split 50/50 unless an alternative percentage is elected

Example Threshold Calculation:

• Total property placed in service: $4,300,000
• Excess: $300,000
• Maximum deduction: $2,500,000 − $300,000 = $2,200,000 (before income limit)

Information Reporting and Backup Withholding

• §6041 Reporting Threshold: $2,000 per payee per calendar year (for years after 2025)
• Inflation Indexing: Begins with returns required for calendar year 2027
• Backup Withholding Trigger: Applies only if total payments meet or exceed the §6041 threshold
• Backup Withholding Rate: Equal to the fourth-lowest individual tax rate under §1(c)
• TIN Failure Linkage: Backup withholding applies if reporting threshold is met and TIN rules are violated

Example:

• Payment of $1,900 → No reporting or backup withholding
• Payment of $2,000 → Reporting required; backup withholding may apply

Clean Energy and Commercial Property Timing Cutoffs

• Alternative Fuel Refueling Property (§30C):
  • Termination Date: Property placed in service after June 30, 2026 does not qualify
  • Credit Rate: 6% (30% if prevailing wage/apprenticeship requirements are met)
  • Per-Item Cap: $100,000
• Wind and Solar Credits (§45Y / §48E):
  • Physical Work Test: Applies only to projects beginning construction after July 4, 2026
  • Continuity Safe Harbor: Must be placed in service within 4 calendar years
  • Elective Payment/Transfer: Requires IRS pre-filing registration

Opportunity Zones — Rural Substantial Improvement

• Rural Improvement Threshold: 50% of original basis (instead of 100%)
• Measurement Period: 30 months
• Effective Date: Applies to improvements determined on or after July 4, 2025
• Rural Definition: Based on IRS guidance using 2020 Census methodology