Introduction to Section 179

Small business tax deductions such as Section 179 are a powerful tool often overlooked. This tax provision can help you save money while investing in your company’s growth. In this blog post, we will share what Section 179 is, why you should consider using it, and who is eligible to take advantage of this tax benefit.

Please note: Consult your tax advisor regarding Section 179 and bonus depreciation limitations and qualifications.

What is Section 179?

Section 179 of the United States Internal Revenue Code is a tax provision that allows businesses to deduct the full purchase price of qualifying equipment and software the year it was placed in service rather than depreciating it over time. It enables you to accelerate your tax deductions for capital expenditures, which can reduce your taxable income in the current year.

Why You Should Use Section 179

• Immediate Tax Savings: The most significant advantage of Section 179 is that it provides immediate tax savings. By deducting the cost of equipment and software in the year of purchase, you can reduce your taxable income, which leads to a lower tax liability.
• Simplifies Tax Planning: Section 179 is straightforward, unlike other tax deductions. You don’t need to calculate complex depreciation schedules or track the asset’s value over several years. This simplifies tax planning and minimizes the administrative burden.
• Competitive Edge: Utilizing Section 179 can give your business a competitive edge. Up-to-date equipment and software can boost productivity, reduce downtime, and improve customer satisfaction. These benefits can translate into a stronger market position.

Who is Eligible for Section 179?

Section 179 is available to businesses that meet certain criteria, including:

• Business Structure: Sole proprietors, partnerships, corporations, and certain other types of business entities are eligible for Section 179.
• Qualifying Property: To claim Section 179 deductions, the property must be tangible, depreciable, used in the normal course of business, and purchased for business purposes. This can include equipment, machinery, furniture, and even off-the-shelf software.
• Purchase Price Limit: There is a maximum limit on the total cost of property that can be deducted under Section 179. In 2023, the limit was raised to $1,160,000. If the total cost of property exceeds this limit, the deduction begins to phase out.
• Income Limit: Section 179 deductions may be reduced if your business’s total purchases for eligible property exceed a certain threshold, $2,890,000 for 2023. If your purchases exceed this threshold, the deduction limit is reduced dollar for dollar.

Recap of Section 179

Section 179 is a valuable tax benefit for small businesses that can lead to significant savings while promoting investment and growth. By allowing you to deduct the cost of qualifying equipment and software in the year of purchase, it provides an incentive for businesses to upgrade and stay competitive. However, tax laws can change, so it’s essential to consult with a tax professional or accountant to ensure that you are taking full advantage of this valuable tax deduction.

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