Question:   Can the entire acquisition cost of a computer that I purchased for my business be deducted as a business expense or do I have to use depreciation?

Answer:   The acquisition cost of a computer purchased for business use:

• Can be expensed under Code section 179, if qualified, by electing to recover all or part of the cost up to a dollar limit, by deducting the cost  in  you place the computer in service, and, if there is any remaining cost, it is depreciated over 5 years.
• Can be depreciated over a 5-year recovery period, if it is decided not to expense any of the cost under section 179.
• May be eligible for a 100-percent special depreciation allowance if the computer meets certain conditions, instead of recovering the cost through the section 179 deduction and/or depreciation.

NOTE:  For tax years beginning in 2011, the  maximum section 179 deduction you can elect for qualified property (section 179 property) placed in service during the tax year is $500,000 ($535,000, for qualified zone and qualified zone property). This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $2,000,000. You may also see the IRS site for Code Section 179 for the expanded definition.