Section 179 Tax Deduction 2023 - 2024

Do you own a small business and are considering investing in new equipment? Section 179 can be an excellent tax break for you.

Section 179 is an IRS tax code that allows you to write off the entire cost of qualifying equipment you buy during the year. It’s a great way to save on your tax bill when it comes to purchasing new business-related assets, like office equipment, vehicles, and software. The maximum deduction under Section 179 was $500,000 before the TCJA, but it has now been raised to $1 million. You can also deduct a percentage of the amount you spend on your equipment and vehicles based on the time it is used for business purposes. If you are not sure whether Section 179 is right for your company, you can consult with a qualified professional.

The IRS defines equipment as any tangible property with a useful life of more than one year and used in a business. This includes smartphones, copiers, hand tools, office furniture, and more expensive items such as 3D printers, robots, medical and dental devices, and other advanced machinery.

How to qualify for Section 179 Tax Deduction

How to qualify for Section 179 Tax Deduction?

In order to qualify for a section 179 deduction, the asset must be used in a business at least 50% of the time. This can include mixed-use properties that are used for business purposes and also for personal use. If the equipment is used primarily for personal use, it can still qualify for the deduction, but it won’t be eligible in future years. In addition to tangible property, most computer software and certain vehicles also qualify for the deduction under Section 179. Vehicles not used for personal purposes, such as cargo vans and tractor-trailers, can be deducted 100% of the purchase price if they meet additional requirements.

Many businesses have taken advantage of this tax break by purchasing vehicles that they plan to operate as part of their business. One of the most common items used for Section 179 is vehicles, such as passenger cars, SUVs, and vans, that are purchased and put into service in the same year. The vehicle’s GVWR (gross vehicle weight rating) helps determine whether the vehicle is eligible. In addition to new equipment and vehicles, you can also use Section 179 to deduct improvements to non-residential buildings. This includes fire suppression, alarms and security systems, HVAC, and roofing. Before making a major equipment purchase, consider the tax benefits of section 179 and talk with your accountant or tax advisor. By understanding and maximizing this benefit, you can make the most of your purchase and help your business grow.

Bonus Depreciation

Bonus depreciation is another common tool used to write off equipment expenses. Traditionally, companies would take this bonus depreciation on new equipment and then depreciate it over a number of years. The TCJA changed the rules so that Bonus Depreciation is now allowed on used equipment, too. However, businesses must apply Section 179 before they can claim Bonus Depreciation. This can make the difference between getting a large amount of money back this year or not, depending on how your company uses the two deductions.

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