The Section 179 encourages small and medium businesses to invest in themselves

Section 179 of the U.S. internal revenue code is not some mysterious or complicated tax code. Above all, it is what business owners can take over a period of time for purchases of depreciable business equipment instead of capitalizing and depreciating the asset. That is to say, the Section 179 deduction is an immediate expense deduction. As a result, this tax code allows taxpayers to deduct the cost of certain property as an expense when the property is placed in service. Firstly, if the equipment is financed or purchased. Secondly, the full amount of the purchase price is eligible for the deduction.

For example, a taxpayer can take advantage of this Section 179 deduction, if he elects, qualified real property. This also applies to tangible personal property such as machinery and equipment purchased for use in a trade or business.

Essentially, Section 179 tax code allows businesses to deduct the full price of capital assets (like equipment or software purchased) right away rather than depreciating them over their useful life.

A big difference to your company’s bottom line

Many small businesses investing in new equipment usually spread these deductions over several years. Section 179 is meant to target small and medium sized companies. In 2020 The Section 179 deduction limit is $1,040,000. To clarify: the tax incentives are available for depreciable tangible property. It must be acquired by purchase for use in the active conduct of a trade or business. As a result, thanks to new guidelines under the Section 179 tax code, this allows a business to deduct the full cost of new or used qualifying equipment from their 2020 taxes. 

How Section 179 works

Before, when your business bought qualifying equipment, it typically wrote it off a little at a time through depreciation. Although most business owners would prefer to write off the entire equipment purchase price in the year of its purchase – that’s exactly what Section 179 does. Section 179 allows businesses to buy the equipment they need right now, rather than waiting.

Of course, many of the recent Stimulus Acts and Congressional Tax Bills have been included section 179.. Today, Section 179 is one of the few government incentives available to small businesses. Meanwhile, large businesses also benefit from Section 179. Most importantly, one of the great features of this section is more options for buying equipment. Yes! This is even more than you might realize for the type of equipment you can claim.

Add new equipment to your business now! With Section 179-qualifying equipment purchases, you’ll be able to take advantage of a 100% deduction this year. 

• Buy high-value items such as cars, office equipment, software and machinery until December 31st.
• Deduct up to $ 1 million in hardware costs (capped at $ 2.5 million). The deduction starts to slip away after spending $2,500,000.
• Save on taxes in the same year. Remember the time limit! To take the deduction for your 2020-year taxes, it must be used during the 2020 calendar year.

Immediate break on their tax burden – getting real benefits

So, capitalizing and depreciating the asset allows for smaller deductions to be taken over a longer period of time.  However, taking the cost of the equipment as an immediate expense deduction, allows the business to get an immediate break on their tax burden. As a result, by purchasing new equipment, small business owners are motivated to grow their business.

* The equipment purchased to comply with COVID-19 restrictions will be eligible for a Section 179 deduction.

In conclusion, the Section 179 allows business owners to:

1. Purchase new or used qualifying equipment;

2. 100% of the deduction this year (including any amount financed) from your gross taxable income if purchased before December 31, 2020;

3. Improve cash flow for next year.

Now is the time to start! Finance new or used equipment before December 31st to use Section 179 for a 100% tax deduction.

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