Businesses can take a same year tax deduction for every dollar of equipment they buy or finance, up to $500,000.
If you are currently putting off purchasing equipment or software for your business, good news is coming your way. Thanks to the new Section 179 of the tax laws, businesses can take a same year tax deduction for the money they spend on equipment, even things they finance. The new allowance for the deduction is now $500,000 for qualifying purchases. This much-anticipated provision will provide a huge tax break for capital investments and is intended to make buying equipment like computers and software more affordable.
Section 179 allows a full deduction for the equipment immediately, rather than it being depreciated over the years. If you thought it couldn’t get any better, consider to this: Many business owners can finance their qualified equipment and will find that their tax saving will actually be greater than the first year’s payment, making buying equipment profitable for the current tax year.
What Equipment Qualifies?
Equipment that qualifies for Section 179 has two general requirements:
- The property must be "tangible, depreciable, personal property which is acquired for use in the active conduct of a trade or business." So land and buildings do not qualify.
- The property must be put into services in the year in which you claim the deduction.
This makes technology investments a great idea.
Every business can see benefits from upgrading their computers and networks, so if you have been putting off modernizing your systems, now is the time to take advantage of this opportunity. Let Advantage Technology help move your business forward.
The deduction is limited from small to midsize companies and starts phasing out when an organization spends more than $2 million annually on qualifying purchases. It is eliminasdated entirely at the $2.5 million mark.
About Section 179
Section 179 is a law that provides current expensing deductions for those qualified. Previously, the limit started at a minor $25,000 and then was bumped to $125,000. Eventually, this number was increased to $250,000, and now businesses can see a generous $500,000 limitation. Although the Section 179 is available for most businesses, the deduction cannot outweigh the net taxable income from businesses actively ran by the taxpayer.