Today’s economy requires a substantial amount of pivoting while viewing complex challenges through a new lens. It’s hard not to feel like so many things are changing at a rapid pace. Fortunately, one FUNDAMENTAL thing has stayed the same: Section 179 of the IRS Tax Code. If you’re a small business and you’re not familiar with Section 179, we’re here to walk you through it! Take a minute to learn about this powerful tool that will give your company an important edge.
It helps to understand how businesses can utilize financing to purchase equipment or software in order to take advantage of significant tax write-offs. But if you’re interested in leveraging Section 179 before the end of the 2022 fiscal year, you must start taking these considerations now, because we’re in Q4 and this is your last chance to make purchases that will apply to your list of deductions.
Believe it or not, the Section 179 Tax Benefit allows 100% depreciation during the first year of purchase against that same year’s business profits. Therefore, your financed acquisitions are completely tax deductible– up to $1,080,000! In addition, the government allows this equipment to be either new or used so there’s really no reason not to at least consider Section 179 for your business.
Why is Section 179 So Important in Q4?
Using Section 179 at the end of a tax year helps companies take full advantage of the benefit. Not only does it allow a small business to deduct the total purchase price before paying off any finance loans, it also frees up working capital and allows businesses to earn profit and grow their business while maintaining a healthy endowment in the bank.
Not only that, oftentimes these deductions will help tip the scale of an entity’s net profit, bringing them to a more appealing tax bracket, which helps create a significant discount at the end of a fiscal year.
What is Section 179?
Section 179 allows businesses to deduct the cost of certain properties the year they’re placed in service. In order to qualify as an expense for the IRS in this particular section, the equipment must be tangible, physical property. While taxpayers are allowed to deduct up to $1,080,000, a bonus depreciation could also apply to the $2,700,000 spending cap.
Every companies’ financial situation and P&L statements will look different. That’s why it’s important to have an expert on your side to explain the requirements, advocate for your best interest, answer questions and help secure appropriate funding.
What Entities Can Qualify for This Deduction? If you’re a sole proprietor, in a partnership or a corporation, you can qualify for Section 179. As long as the physical property is acquired in the filing year and is used for business purposes more than half the time, the deduction can be used against that year’s business profits.
What Type of Items Qualify?
Examples: Office Equipment , Medical equipment, Construction Equipment, Commercial Vehicles (such as trucks, trailers, forklifts, etc.), Computers and Printers, Office Furniture, Software (must be considered “Off-The-Shelf” or available to the general public– not custom-developed).
What Are Some Other Benefits of Financing?
We understand the benefits of reaching financial goals and attaining those bottom lines before the end of 2022. As long as businesses purchase with Capital Leases or Equipment Finance Agreements and utilize their equipment in 2022, they may be able take advantage of Section 179 this year.
Moreover, we offer flexible financing terms and can even offer deferred payments so you don’t have to make any payments until 2023! Why risk the potential for rising interest rates and the inevitability of inflation when you can take advantage of Section 179 this year? Help protect yourself and your business from the impact of a potentially volatile economy by locking in current rates and equipment pricing.
How to Qualify
Qualified amounts may vary. We recommend consulting with your tax advisor or accountant before making any Section 179 decisions.
***This article is for informational purposes only. Finance it Forward does not warrant or guarantee that you will qualify for an IRS 179 deductible.***
About the Author
Iman Gorji is the Managing Partner and driving force behind Finance it Forward. He has been in the commercial lending industry for over 10 years. He is an expert in business financing and is extremely passionate about providing equipment financing solutions to small businesses, equipment dealers, manufacturers, and distributors.
When he is not helping businesses grow, Iman enjoys yoga, going on fishing trips and hanging out with friends and family.