You may have heard about Section 179 of the Internal Revenue Code, an exciting new way to minimize your tax burden. The good news? This part of the tax code was created to benefit small to medium-sized businesses just like yours! We’ve put together highlights of what 179 can do for you.
Understanding Section 179
Sec 179, for short, is a law that allows businesses to deduct the full purchase price of any equipment leased or financed during the tax year. While there are dollar limits and some stipulations, most companies can take advantage of IRC Section 179 for the 2016 tax year.
Section 179 Deductions
Section 179 expenses or deductions are simply how much money a company can save with this part of the tax code. Any qualified assets up to a certain amount can be expensed as long as they are placed into use during the current tax year.
How Much Money Can Section 179 Save You?
Every small to medium-sized business is different, and each of these companies will be able to use Section 179 in a different manner. The important fact to know about Internal Revenue Code (IRC) 179 is it’s truly a small business tax incentive and not created for large corporations. The spending cap for the current year under Section 179 is $500,000. This means if you finance a piece of equipment, you can deduct the Full Purchase Price (up to $500,000) from your gross income. The old limit was $25,000.
This means you can purchase more equipment and still have the benefit of the Section 179 deduction.
For equipment purchases over the Section 179 deduction limit of $500,000 you can deduct an additional 50 percent of the amount over $500,000 in addition to the standard depreciation deduction. This applies to equipment acquired and put into service during the 2015, 2016 and 2017 tax years. The bonus depreciation will phase down to 40 percent in 2018 and 30 percent in 2019. The old limit was $0.
To break this down, if a company spends $500,000 on business equipment in the year, they would be eligible for a $500,000 equipment tax deduction under Section 179. Bonus depreciation old limit was $200,000, and in 2015, was raised to $2,000,000. This may be a bit oversimplified; however, this is the gist of Section 179 deductions. Understanding how this part of the IRS Tax Code works is one thing, but making it useful for your company is another. Just remember to run anything tax-related past your CPA.
Here at Lease Genie we understand the ins and outs of Section 179. If you’re striving to maximize every penny in deductions, we know how to make this tax code work for your business. We finance clients of all credit ratings and help companies take advantage of Section 179 deductions. Contact us today.