What is the Section 179 Deduction
Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves.
Here’s How Section 179 works:
Section 179 allows your business to write off the entire purchase price of qualifying equipment for the current tax year. This has made a big difference for many companies. Businesses have used Section 179 to purchase needed equipment right now, instead of waiting. For most small businesses, the entire cost of qualifying equipment can be written-off on the 2019 tax return (up to $1,000,000).
Limits of Section 179
Section 179 does come with limits – there are caps to the total amount written off ($1,000,000 for 2019), and limits to the total amount of the equipment purchased ($2,500,000 in 2019). The deduction begins to phase out on a dollar-for-dollar basis after $2,500,000 is spent by a given business (thus, the entire deduction goes away once $3,500,000 in purchases is reached), so this makes it a true small and medium-sized business deduction.
Who Qualifies for Section 179?
All businesses that purchase, finance, and/or lease new or used business equipment during tax year 2019 should qualify for the Section 179 Deduction (assuming they spend less than $3,500,000).
Most tangible goods used by American businesses, including “off-the-shelf” software and business-use vehicles (restrictions apply) qualify for the Section 179 Deduction.
Also, to qualify for the Section 179 Deduction, the equipment and/or software purchased or financed must be placed into service between January 1, 2019 and December 31, 2019.
What’s the difference between Section 179 and Bonus Depreciation?
Bonus depreciation is offered some years, and some years it isn’t. Right now in 2019, it’s being offered at 100%.
The most important difference is both new and used equipment qualify for the Section 179 Deduction (as long as the used equipment is “new to you”), while Bonus Depreciation has only covered new equipment only until the most recent tax law passed. In a switch from recent years, the bonus depreciation now includes used equipment.
Section 179’s “More Than 50 Percent Business-Use” Requirement
The equipment, vehicle(s), and/or software must be used for business purposes more than 50% of the time to qualify for the Section 179 Deduction. Simply multiply the cost of the equipment, vehicle(s), and/or software by the percentage of business-use to arrive at the monetary amount eligible for Section 179.
For more information, please visit www.section179.org
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