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