Most people are not fully utilizing the section 179 deduction, simply because their CPA’s do not fully understand it. We’re here to help you demystify it. Basically, 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. For reference, The 2016 Deduction Limit is $500,000.00
Typically, you write off a proportional amount every year through depreciation. However, if you could write off the full amount, this would encourage you to buy more equipment. Which is exactly why Section 179 was created to help stimulate the economy.
Section 179 does come with limits – there are caps to the total amount written off ($500,000 for 2016), and limits to the total amount of the equipment purchased ($2,000,000 in 2016). The deduction begins to phase out dollar-for-dollar after $2,000,000 is spent by a given business, so this makes it a true small and medium-sized business deduction.
Keep in mind—to qualify for the Section 179 Deduction, the equipment listed below must be purchased and put into use between January 1st and December 31st of the tax year you are claiming. Check out this list we’ve complied of all qualifying equipment.
- Equipment purchased for business use
- Tangible personal property used in business
- Business Vehicles with a gross vehicle weight in excess of 6,000 lbs. (Section 179 Vehicle Deductions)
- Computer “Off-the-Shelf” Software
- Office Furniture
- Office Equipment
- Property attached to your building that is not a structural component of the building. (Items like a printing press, large manufacturing tools, and equipment).
- Partial Business Use (equipment that is purchased for business use and personal use: generally, your deduction will be based on the percentage of time you use the equipment for business purposes).
It’s time to take advantage of your businesses’ section 179 deduction. First, make any equipment purchases you need before the end of this year. Then get together with your CPA and figure out how you can make this year you avoid paying the IRS money you could keep in your pocket. Interested in a relationship with us? Give us a ring at 513-791-6288.