Geared towards helping small- to medium-sized businesses, Section 179 of the United States Internal Revenue Service tax code is a deduction that allows smaller companies to deduct the full purchase price of certain types of property and equipment purchased or financed during the tax year from its gross income as an expense, rather than requiring the cost of the property to be capitalized and depreciated.
When a business buys certain items of equipment, it usually can write them off a little at a time through depreciation. For example, if a company spends $50,000 on a machine, it gets to write off around $10,000 a year for fi ve years, depending on the company’s tax status.
With Section 179, most small businesses can write-off the entire cost of its capital purchases in a year instead of depreciating them, up to $500,000, through December 31, 2013. Property is generally limited to tangible, depreciable, personal property which is acquired by purchase to conduct business. The thinking is that if a business can write off the entire amount, it might add more equipment this year instead of waiting to add more over time, essentially stimulating the economy and the company.
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