Section 179 Tax Deduction- A true benefit for small businesses

What is 179 Tax Deduction?

Section 179 Tax Deduction is a simplified section of the United States tax code. It is a powerful incentive that is directly targeted at small businesses to buy equipment for business expansion and to make it profitable in a tax sense.  Small businesses fail to reap full tax benefits on their business equipment costs, as they must depreciate it over a course of numerous years. If any business invests less than $2,000,000 a year, Section 179 of the IRS tax code allows immediate write off up to $500,000 of capital equipment. Meaning, if you buy a piece of qualifying equipment of value anywhere from $100 to $2,000,000, you can claim complete deduction until it touches that figure. Thus, a FULL PURCHASE PRICE of eligible equipment or software bought or financed can be deducted during the tax year.

How to qualify for 179 Tax Deduction?

Invest in purchasing ELIGIBLE EQUIPMENT only. To qualify as eligible equipment, the equipment need not be a brand new piece. Essentially, any business equipment new or used (but new to you) as long as it is not installed permanently (movable structures), will qualify in all likelihood.  All commercial equipment, off-the-shelf software with a non-exclusive license (except websites) and certain heavy vehicles intended for commercial use come under qualifying property for Section 179. For an inclusive list of qualified equipment, please refer IRS Publication 946.

How to use 179 Tax Deduction?

  • Buy, finance, and/or lease less than $2,000,000 worth business equipment during tax year 2016
  • Ensure that the eligible equipment purchased is intended for business purpose only and is used more than 50% of the time
  • Put into service all the equipment and/or software obtained by midnight (11.59 pm) 12/31/2016

What are limitations to 179 Tax Deduction?

  • Total cost of the eligible equipment bought cannot be more than $2,000,000 for 2016
  • Total cost written off cannot be more than $500,000 for 2016.
  • If the total cost of eligible equipment purchase is more than $2,000,000, the deduction starts to phase out. This makes it a real small business deduction.

Write off the total equipment cost on your 2016 taxes!

Section 179 has provided much tax relief for small businesses that find it difficult to buy needed equipment when it is really needed.  Thus, with the help of such a legitimate tax deduction, you can save money and invest back in your business.

Disclaimer: You should always consult with your tax advisor as each business tax situation is unique.