Can I Take a 179 Deduction for Equipment?

When it comes to running a business, purchasing equipment is a necessary expense that can often come with a hefty price tag.

section 179 equipment deduction

However, business owners can take advantage of a potential tax benefit when purchasing equipment: the Section 179 deduction.

In this article, we'll explore what the Section 179 deduction is, how it works, and whether or not you can take advantage of it.

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What is the Section 179 Deduction?

The Section 179 deduction is a tax deduction that allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year.

This deduction was created to encourage businesses to invest in themselves by purchasing new equipment and making other qualifying investments.

How Does the Section 179 Deduction Work?

To take advantage of the Section 179 deduction, you must purchase or finance the equipment in the same tax year in which you plan to claim the deduction.

The deduction allows you to deduct the full purchase price of the equipment, up to a certain limit, from your taxable income.

The limit is $1,160,000, which means that businesses can deduct up to $1,160,000 in equipment purchases from their taxable income.

In addition to the $1,160,000 limit, there is also a "total equipment purchased for the year" limit of $2,890,000.

This means that if you purchase more than $2,890,000 worth of equipment in a single tax year, the amount you can deduct under the Section 179 deduction will be reduced dollar-for-dollar until it reaches zero.

What Qualifies for the Section 179 Deduction?

Not all equipment purchases qualify for the Section 179 deduction. In order to qualify, the equipment must be used for business purposes more than 50% of the time.

Additionally, the equipment must be tangible personal property, meaning it must be something you can touch and physically move, such as machinery, vehicles, or office equipment.

Can You Take Advantage of the Section 179 Deduction?

The good news is that most businesses can take advantage of the Section 179 deduction.

However, there are some businesses that may not qualify for the deduction, such as businesses that are not profitable or that do not have taxable income.

Additionally, businesses that have already reached the $2,890,000 "total equipment purchased for the year" limit will not be able to take advantage of the deduction.

A Valuable Tax Benefit for Businesses

The Section 179 deduction can be a valuable tax benefit for businesses that purchase new equipment and/or software.

By allowing businesses to deduct the full purchase price of qualifying equipment and/or software, up to a certain limit, the Section 179 deduction encourages businesses to invest in themselves and grow their operations.

If you're considering purchasing new equipment or software for your business, be sure to look into the Section 179 deduction to see if you qualify.

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