Understanding the Section 179 Deduction

What is the 2017 Section 179 Deduction?

Section 179 is an IRS tax code that allows businesses to deduct the full cost of qualifying equipment and/or software purchased or leased from your “gross income” during the tax year. Basically, this is an incentive from the U.S. Government to encourage businesses to buy or lease equipment and invest back in their company.

Today, Section 179 is one of the few incentives included in any of the recent Stimulus Bills that actually helps small businesses, and millions of small businesses are taking action and getting real benefits by investing back into their business with equipment acquisitions that both benefit their business and their bottom line.

How does Section 179 Work?

179After a business leases or purchases equipment and/or software, they are able to deduct the entire amount up to $500,000 per each single purchase and a combined lease or purchase of up to $2,000,000 on new to the company (which can include used equipment) each tax year. The equipment must be acquired and put in place within the tax year of January 1st through December 31st.

What is the difference between Section 179 and Bonus Depreciation?

Section 179 Tax Deduction applies to all new and or used purchases that are considered “new” equipment/software to the business. This includes used equipment if it is new to the business purchasing or financing it.
Bonus Depreciation only covers 50% of financed or purchased NEW equipment. Bonus Depreciation is beneficial if the new purchase exceeds the limit of the Section 179 cap of $500,000 per new purchase and if the company will exceed the $2,000,000 over all cap.

Are Vehicles covered under Section 179?

There are limitations to which vehicles are covered under Section 179. For instance, most Section 179 requirements include the purchased or financed item must be used at least 50% of the time. But with some companies, that may be more or less. For specific IRS Guidelines regarding Section 179 tax please visit IRS Guidelines for Vehicles on the IRS Section 179 website.
Section 179 Requirement

Section 179 does have a 50% rule. The financed or purchased equipment and/ or software must be used at least 50% of the time or more by the company to qualify for the 179 Tax Deduction.

To download Section 179 Informational pfd, Click Here

Don’t miss out on this great tax benefit. To find out more, call us today! 913-341-0053

 

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