The Internal Revenue Service issued Tuesday new guidelines expanding small business tax deductions for tangible property and computer software.

Small businesses can generally deduct up to $100,000 of the cost of qualifying property that is bought and used in a tax year beginning after 2002 and before 2006, the IRS said in temporary and proposed final rules.

Using amended returns for those tax years, these taxpayers can now make or revoke a deduction without the IRS commissioner's consent, it said.

The regulations reflect tax law changes in the Jobs and Growth Tax Relief Reconciliation Act of 2003, including expansion of a previous $25,000 deduction allowance and addition of computer software, an intangible property, to the category of deductible property.

The ability to expense up to $100,000 of the cost of depreciable property will significantly reduce the record-keeping burden imposed on small business taxpayers, Acting Treasury Assistant Secretary for Tax Policy Greg Jenner said in a prepared statement.

The IRS is taking comment on the proposed rules until Nov. 2 and plans to hold a public hearing on them Nov. 30.

Campion Walsh

Dow Jones Newswires

August 03, 2004