It’s rare laws are enacted to help the small business owner, but there’s good news! A law has been created to lower the tax burden on small to medium-sized businesses. This law is designed to help family owned and operated businesses, instead of large corporations. If you own a small to medium-sized business, Section 179, also known as IRC 179 or IRS 179, can help you save money so you can boost your bottom line. Here’s what you need to know about Section 179 deductions.
What Are Section 179 Deductions?
Section 179 (part of the IRS tax code) allows a business to deduct the full purchase price of leased or financed equipment for the current tax year. This means you can write off the full purchase price of leased equipment with this equipment tax deduction. The equipment you write off must be within certain dollar limits specified within the code. Any equipment you deduct must be placed into use during the tax year the deduction is being claimed as well.
Bonus depreciation only covers new equipment after the Section 179 cap is reached. This is a significant advantage to smaller companies that operate on a tight budget. Another benefit some businesses receive from IRS Section 179 stems from carry-over bonus depreciation. Section 179 deductions usually come first, and then a company can claim bonus depreciation once certain limits are reached. If a business has net losses during a tax year, these bonus depreciation credits can carry over.
Section 179 Deduction Limits
Please keep in mind, as of 2016, the Section 179 deduction limits are capped at $500,000. The spending cap on equipment purchases is $2,000,000. The percentage limit regarding bonus depreciation is set to 50 percent this year.
How Can You Determine What Qualifies?
Nearly all types of business equipment will qualify for Section 179 deductions. Some examples include:
- Heavy equipment
- Construction equipment
- Business vehicles exceeding certain gross weight
- “Off-the-Shelf” software
- Office equipment
- Office furniture
- Printing presses
- Large manufacturing tools
- And more!
How Section 179 Benefits Your Business
By utilizing the appropriate equipment lease financing program and planning to implement new equipment in the field quickly, you can save a lot of money using Section 179 deductions. Small businesses no longer have to fight long-term depreciation struggles thanks to IRC 179. This new tax code helps small businesses keep the cash flowing! Please keep in mind tax laws can change and you should always consult your tax accountant.
If you’re struggling to finance the equipment your business needs, contact us. We can help you use IRC 179 to your advantage. Lease Genie provides financing to more than just “A” credit clients and looks forward to helping your business grow.