Understanding How Section 179 Works…
Section 179 is a tax code created to help businesses. By allowing businesses to deduct the full amount of the purchase price of equipment (up to certain limits, for 2015 the deduction amount limit is $25,000) Section 179 is a fantastic incentive for businesses to purchase equipment this year.
Most people think the Section 179 deduction is some mysterious or complicated tax code. It really isn’t, as you will see below.
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 that if you buy a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves.
Several years ago, Section 179 was often referred to as the “SUV Tax Loophole” or the “Hummer Deduction” because many businesses have used this tax code to write-off the purchase of qualifying vehicles at the time (like SUV’s and Hummers).
Section 179 can greatly help your bottom line. By deducting the full cost, you lower the amount you pay for equipment and/or software substantially. And these benefits can be further expanded if you choose to lease or finance your equipment & software.
Section 179 is simple to use. All you need to do is buy the equipment, and use a special IRS form. That’s it.
There is simply no better time than now to take advantage of Section 179 and Bonus Depreciation. Why? Because it is a Use-It-or-Lose-It write-off that ends December 31st.
The ‘Section 179 Deduction’ Helps Your Business!
Dec 19, 2015 – “The Protecting Americans from Tax Hikes Act of 2015” passed by both the House and Senate and will be signed into law in the next few days – expanding the Section 179 deduction limit to $500,000. Read the summary from the Ways and Means committee here.
Section 179 will be permanent at the $500,000 level. Businesses exceeding a total of $2 million of purchases in qualifying equipment will have the Section 179 deduction phase-out dollar-for-dollar and completely eliminated above $2.5 million. Additionally, the Section 179 cap will be indexed to inflation in $10,000 increments in future years.
50% Bonus Depreciation will be extended through 2019. Businesses of all sizes will be able to depreciate 50 percent of the cost of equipment acquired and put in service during 2015, 2016 and 2017. Then bonus depreciation will phase down to 40 percent in 2018 and 30 percent in 2019.