MIDVALE, Utah - What Is the Section 179 Deduction?
If your business is considering investing in large-cap items, such as new or used heavy equipment, semis or other commercial trucks, and even high-dollar business software, the Section 179 deduction allowed by the IRS is an incentive you need to understand and use to your financial advantage.
This article can obviously not focus on every last detail of the Section 179 deduction (it is, after all an IRS creation, and is therefore subject to various qualifications and refinements), but there are numerous resources available to dive more deeply into the specifics of the deduction. Here, we will provide a basic understanding of qualifications and benefits.
Section 179 is essentially a tax break given to businesses that allows deduction of the full purchase price of equipment purchased – or financed – against their gross income. This is a significant incentive for companies to make investments in purchasing equipment and growing their business. The deduction varies from year to year. For 2016, the purchase limit is $2 million with a deduction cap of $500 thousand.
Depreciation is often utilized by businesses to write off the value of purchased equipment over the life of the asset, but Section 179 provides the distinct advantage of deducting the full price in the year acquired. The equipment purchased must be placed in service by the end of the year for which the deduction is taken.
What Qualifies for the Section 179 Deduction?
A wide variety of business equipment purchases are qualifying assets for Section 179:
Machines utilized for business use
Business vehicles (trucks, heavy equipment, and vehicles with GVW exceeding 6K pounds)
Office furniture and office equipment
Computers and commercial "off the shelf" software
Equipment purchased for partial business use (this is generally deducted at the percentage the equipment is used for business)
An additional consideration for business tax advantage is that once you have maximized your deduction for Section 179, purchases of new equipment may also qualify for the "Bonus Depreciation" deduction, which for 2016 is set at 50%.
How do You Claim the Section 179 Deduction?
Section 179 deductions are elective. You can claim individual equipment for the deduction, and not claim it for other assets. But it is not automatic. You must elect this deduction when filing your taxes using the proper IRS form 4562. Your tax preparer can assist with that as well.
Making Section 179 Work for You – Consulting with Experts
When planning a purchase or financing of new or used trucks or other equipment check with the seller to verify if the equipment or software qualifies for the Section 179 deduction. Many suppliers are well aware of their qualifying status, and may even display the "Section 179 Qualified" symbol on their web sites.
Integrity Financial Groups is a leader in the equipment finance industry, serving companies which opt to purchase or lease equipment. They bill themselves as fully understanding the qualifications and limitations of Section 179 deductions and able to provide expertise in financing and deduction options for businesses. This allows owners to leverage their capital to their best advantage while growing their businesses.
To contact Integrity Financial Groups, visit their website at http://equipmentfinanceservices.com/
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