If your company needs an equipment overhaul to bring your business up to speed, or if you’re getting ready for a major new investment, now is the right time to pull the trigger thanks to this year’s updates to Section 179.
What Is Section 179?
Section 179 is an important part of the IRS tax code that lets businesses deduct the full purchase price of qualifying equipment (or software) from their gross income.
Qualifying purchases must be made during the tax year—that means if you’re looking to take advantage of Section 179 this year, you’ll need to purchase the equipment and get it up and running before the end of the day on December 31, 2019.
What Kind of Equipment Qualifies for the Deduction?
Nearly all tangible goods used by your business (at least 50% of the time) are eligible for the Section 179 Deduction. While the list is self-explanatory, there are a few exceptions, especially when it comes to items that are purchased for both business and personal use. (Find out if your equipment qualifies here.)
Qualifying equipment must be purchased between January 1 and December 31 of the tax year to take advantage of the deduction. If you tend to lease your equipment, you’re also in luck—whether the equipment is new or used, purchased, leased or financed, it still qualifies.
Limits and Caps
This year, the total amount you can write off (the deduction limit) is capped at $1,000,000—but you also have spending caps to take in mind. For the 2019 year, the maximum amount you can spend on equipment is $2,500,000 in order to receive a full deduction. Once you surpass this threshold, the deduction is incrementally reduced until you spend more than $3,500,000, at which point you no longer receive a deduction.
Companies who exceed the Section 179 spending cap can still benefit this year, thanks to Bonus Depreciation—an incentive that lets you deduct a percentage of the purchase price the year equipment is purchased, instead of having to write it off over the spam of the equipment’s useful life.
This year both new and used equipment that is new to your company qualify for the Bonus Depreciation deduction. Even better, this year’s depreciation rate is 100%.
Section 179 limits and incentives fluctuate from year to year, and bonus depreciation is not always offered. Many years, it is only offered at 50% or less. That makes this year an attractive time for c-stores and gas station owners, fleets, UST operators, farmers, manufacturers and just about business to finally upgrade to new equipment and make new investments that position themselves to outperform their competition.
Can My Business Take Advantage of Section 179?
Although Section 179 can help ALL businesses invest in themselves, it was designed specifically to provide tax relief for small and medium sized businesses. If your equipment is eligible—that means you are eligible.
- Plug some numbers into Section179.org’s Deduction Calculator to get an idea of the savings your company will see.
- Consult with your accountant or financial advisor to discuss how Section 179 deductions will factor into your purchasing strategy now, and in the future.
- If you’ve been holding off on making a big equipment purchase, there’s still time to take advantage of this year’s Section 179 benefits. Contact X at Acterra and let’s talk timelines, budget and how to make it happen.