when they file their annual taxes businesses can write off the costs of the tangible property they own in several different ways either as deductions or through one of several depreciation methods 
listed property that meets the requirement of more than 50 business use is eligible for a section 179 tax deduction rather than having to depreciate an asset over a period of time a section 179 deduction allows a business to write off all or most of its cost in the year it was placed in service 7 often that will mean the same year as it was purchased the irs sets limits on how large a section 179 deduction businesses can take in any given year for tax years beginning in 2023 the deduction maxes out at 1 16 million for tax years beginning in 2024 the maximum section 179 expense deduction is 1 220 000 8 in addition certain types of property may be subject to their own maximums for example the maximum section 179 deduction for sport utility vehicles is 28 900 again for tax years beginning in 2023 8in addition a section 179 deduction cannot exceed your taxable business income for the year 9 any amount that remains after taking the deduction can then be depreciated 10you can t of course write off the entire cost of an asset if you use it for business only a portion of the time instead that use must be prorated as a percentage the irs offers this simple example may oak bought and placed in service an item of section 179 property costing 11 000 may used the property 80 for business and 20 for personal purposes the business part of the cost of the property is 8 800 80 0 80 11 000 11businesses can claim a section 179 deduction using irs form 4562 depreciationlisted property can also be depreciated over time property that meets the more than 50 test is eligible for the general depreciation system gds an accounting method that allows it to be written off more quickly with larger deductions in the early years if property is used 50 or less for business the business portion can still be written off but only using the alternative depreciation system ads which generally takes longer and spreads deductions out evenly over the years 12listed property that is used more than 50 for business can also be eligible for the special depreciation allowance sometimes referred to as bonus depreciation it allows taxpayers to write off an even greater amount during the first year this allowance applies only to qualified property that was purchased and placed in service after sept 27 2017 and before jan 1 2023 the allowance started at 100 in 2022 and is declining by 20 each year until it reaches 0 in 2027 listed property that is used 50 or less for business is considered excepted property and not eligible 1314defining listed property business useyou can claim the section 179 deduction if the property meets the business use requirement to meet this business use listed property must be used predominantly more than 50 of its total use for qualified business purposes if the property does not meet this requirement it will not qualify for the deduction and straight line under macrs must be used 8there is an exception for leased property the business use requirement does not apply to listed property leased or held for leasing by someone regularly engaged in the business of leasing listed property to be considered regularly engaged in leasing you have to enter into leasing contracts frequently over a continuous period so it has to reflect the normal nature of your business occasional or incidental leasing does not qualify for example leasing just one passenger automobile in a tax year does not constitute being regularly engaged in the business of leasing automobiles however rotating leases that span a fleet of vehicles may similarly an employer charging an employee for the personal use of the employer s property is not considered regularly engaged in leasing the property allocating use of listed propertyto determine if something meets the business use requirement you need to divide its use among different purposes during the year for cars and other transportation use mileage to figure this out find the percentage of business use by dividing the miles driven for business by the total miles driven during the year for other items use the actual time the property is used not just available for example calculate the business use percentage by dividing the hours used for business by the total hours used during the year only count activities like entertainment or amusement as business use if you can deduct the expenses as necessary business costs 8remember that commuting or traveling to work does not count as business use even if you work during the trip a business call made during commuting or on a personal trip does not change the trip to business travel if someone else uses your car it s not business use unless it s directly connected with your business reported as income or you are paid fair rent employee use of property is considered business use only if it is required for the job and the employer s convenience 8can employees deduct listed property according to the irs employees can claim a depreciation deduction for the use of your listed property whether owned or rented in performing services as an employee only if your use is a business use in addition the use must be for the employer s convenience and required as a condition of employment 15