Take Advantage of Your SECTION 179 Benefits

By Renée Martin - General Manager, HDD Broker LLC - December 7, 2016

What is the Section 179 deduction?

Section 179 of the IRS tax code allows businesses to deduct the FULL PURCHASE PRICE (up to $500,000 in 2016) of qualifying NEW or USED equipment (such as company vehicles, machinery or software) from your gross income. It's an incentive created by the US government to encourage businesses to buy equipment and invest in themselves.

Who qualifies for the Section 179 deduction?

All businesses that purchase, finance, or lease less than $2,000,000 in new or used business equipment during 2016 qualify.

Are there limits to Section 179 deductions?

There are caps to the total amount written off ($500,000 in 2016), and limits to the total amount of the equipment purchased ($2,000,000 in 2016). The deduction begins to phase out dollar-for-dollar after $2,000,000 is spent by a given business, so this makes it a true small and medium sized business deduction.

Sample Calculation*:

Cost of equipment $700,000
1st year write-offs $500,000
Section 179 Bonus depreciation (50% of remainder) $100,000
Normal 1st year Depreciation $20,000
Total 1st year deduction $620,000
Savings on Purchase (assumed 35% tax) $217,000
Bottom line equipment cost (after tax savings) $483,000

*Click here for the fully updated Section 179 Calculator for tax year 2016

*Please consult your tax advisor for details regarding Section 179 benefits and limitations. For more information, please visit http://www.section179.org

This commentary is presented for informational purposes only. It is not intended to be a comprehensive or detailed statement on any subject and no representations or warranties, express or implied, are made as to its accuracy, timeliness or completeness. Nothing in this commentary is intended to provide financial, legal, accounting or tax advice nor should it be relied upon. Neither HDD Broker LLC nor the author is liable whatsoever for any loss or damage caused by, or resulting from, any use of or any inaccuracies, errors or omissions in the information provided.

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