SECTION 179


SAVE BIG MONEY OFF OF YOUR TAX BILL ! 

What is Section 179

Essentially, 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 if you finance a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. This deduction is not automatic and must be elected. In order to elect to take the deduction, you’ll need to fill out Part 1 of IRS form 4562.

WHAT PROPERTY QUALIFIES?

You qualify for the Section 179 deduction if you finance long-term, tangible personal property that you use in your business more than 50% of the time.

What does this mean exactly?

WRITE OFF 100% OF YOUR BUSINESS VEHICLE IN THE FIRST YEAR OF PURCHASE. 


 

TANGIBLE PERSONAL PROPERTY

Under Section 179, you can deduct the cost of tangible personal property (new or used) that you finance for your business if the IRS has determined that the property will last more than one year. Examples of tangible personal property include computers, business equipment and machinery/heavy equipment, and office furniture. 

You can’t use Section 179 to deduct the cost of:

  • Land or Inventory
  • Permanent structures attached to land (buildings and their structural components, fences, swimming pools, or paved parking areas)
  • Intangible property such as patents, copyrights, and trademarks
  • Property used outside the United States, or
  • Air conditioning and heating units

Annual Deduction Limit – There is a $500,000 limit on the total amount of business property expenses you can deduct each year under Section 179. When first enacted, the Section 179 annual limit was set at a relatively modest $10,000. Over the years, Congress kept raising the limit in an effort to help small businesses during tough economic times.

In 2015, the annual limit was made permanent at $500,000. Because Section 179 is intended to help small businesses, there is also a limit on the total amount of Section 179 property a business can finance each year before a phase-out in the deduction begins. Under these rules, the amount you can deduct each year under Section 179 is reduced dollar for dollar by the amount your business investment financing exceed the annual investment limit.

The annual business investment limit is $2 million (also made permanent by Congress in 2015). The $500,000 annual limit and $2 million maximum business investment limit are indexed for inflation each year starting in 2016.