Although most business equipment must be depreciated over many years, Internal Revenue Code (IRC or the Code) Section 179 permits many small companies to “expense” their purchases of new and used equipment, meaning that costs can be deducted immediately. In 2006, first year writeoffs up to $108,000 worth of equipment purchases are permitted.

The IRC Section 179 allowance was scheduled to go down to $25,000 after 2007. However, the new tax law keeps the 2006 limit in effect, through 2009. Each year, the maximum deduction will increase with inflation. This extension allows small businesses to plan capital purchases on a longer-term basis, using simple system with an immediate tax benefit. The new law also extends to 2009 the time in which a business can make or revoke an expensing election with Internal Revenue Service (IRS) consent. A special provision of the new law allows off-the-shelf computer software to remain eligible for the IRC Section 179 deduction, through 2009.