SECTION 179 TAX DEDUCTION AT A GLANCE
2021 Deduction Limit = $1,050,000
This deduction is good on new and used equipment, as well as off-the-shelf software. To take the deduction for tax year 2021, the equipment must be financed or purchased and put into service between January 1, 2021 and the end of the day on December 31, 2021.
2021 Spending Cap on equipment purchases = $2,620,000
This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced on a dollar for dollar basis. This spending cap makes Section 179 a true “small business tax incentive” (because larger businesses that spend more than $3,670,000 on equipment won’t get the deduction.)
Bonus Depreciation: 100% for 2021
Bonus Depreciation is generally taken after the Section 179 Spending Cap is reached. The Bonus Depreciation is available for both new and used equipment.
The above is an overall, “birds-eye” view of the Section 179 Deduction for 2021. For more details on limits and qualifying equipment, as well as Section 179 Qualified Financing, please read this entire website carefully. We will also make sure to update this page if the limits change.
Here is an updated example of Section 179 at work during the 2021 tax year:
What Does the 2021 Section 179 Tax Deduction Cover?
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?
After a business leases or purchases equipment and/or software, they are able to deduct the entire amount up to $1,000,000 per each single purchase and a combined lease or purchase of up to $2,500,000 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’s the Difference Between Section 179 & 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 100% of financed or purchased NEW equipment. Bonus Depreciation is beneficial if the new purchase exceeds the limit of the Section 179 cap of $1,000,000 per new purchase and if the company will exceed the $2,500,000 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 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.
NEWS ALERT: SEE THE IRS FACT SHEET ISSUED FOR SECTION 179
IRS Fact sheet FS-2018-9 provides current info on Section 179 deductions, including the addition of certain building improvements, the 100 percent bonus depreciation, changes to depreciation limitations
on vehicles used for business, new treatment of farm equipment, and the recovery period for real property. Despite the 2018 date, the information is still current for 2021.
Read the Fact sheet here: New Rules and Limitations for Depreciation and Expensing under the Tax Cuts and Jobs Act.
ANSWERS TO THE THREE MOST COMMON SECTION 179 QUESTIONS
How Much Can I Save on My Taxes This Year?
It depends on how much qualifying equipment and software you purchase and put into use this year.
What Sort of Equipment Qualifies?
Most tangible business equipment, both new and used, qualifies.
When Do I Have to Do This By?
Section 179 always expires at midnight, December 31st. So to take advantage of Section 179 this year, you must buy (or lease/finance) your equipment, and put it into use, by December 31st of this year.
***Note: In 2021, many businesses are finding Section 179 Qualified Financing to be a very attractive option, especially with several expected Federal Discount Rate increases looming. You can beat future increases by applying today.
Don’t miss out on this great tax benefit. To find out more, call us today!
Commercial Capital Company, LLC
Main Phone: (913) 341-0053