What Is Section 179?

Section 179 is an incentive for small to medium sized businesses to invest in equipment and grow their company through reduced tax liabilities. Under extended Section 179 limits established by the Protecting Americans from Tax Hikes Act of 2015, businesses are allowed to purchase qualifying equipment to immediately depreciate new or used equipment costs.

Additional depreciation for both new and used qualifying equipment is allowed with the use of the standard first year depreciation allowance (under MACRS rules, 20% for equipment with a 5 year class life as defined in IRC Section 168).

How To Qualify for Section 179?

The first requirement for section 179 is that you must have purchased and put your equipment in service between Jan. 1st and Dec. 31st of the calendar year. The next requirement is that your total investments for the year must be under $2,000,000 of equipment. Additionally, the maximum amount that you can write off is $1,000,000.

Section 179 is simple to use. All you need to do is buy (or finance) the equipment, and use IRS Form 4562.

 

Benefits Of Using Section 179

• Write off up to $1,000,000 of Equipment costs
• Tax Deductions for up to $2,000,000 in Equipment
• Section 179 allows you to depreciate your equipment 100% this year instead of over 5 years
• You also get to write off the interest expense for the next 5 years
• You can use the finance company’s money, preserve yours and still gain all the tax benefits
• Leasing allows you to pay off any time after 12 months at the remaining principal balance, no interest

Scenario 1:
No Equipment Purchase

Taxable Income: $500,000

Tax Rate: 21%

Tax Liability: $105,000

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Scenario 2:
$200K Equipment Purchase*

Taxable Income: $500,000

Less Equipment Purchase: $200,000

Taxable Income After Purchase: $300,000

Tax Rate: 21%

Tax Liability: $63,000

Total Amount Saved: $42,000