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Business Owners: Don’t forget about the Section 179 Tax Deduction

Jun

24

Business Owners: Don’t forget about the Section 179 Tax Deduction

Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment. The deduction is available for most new and used capital equipment and/or software that has been purchased or leased during the tax year. In accordance with the [www.Section179.org], almost all types of “business equipment” will qualify for the Section 179 Tax deduction.

 

This means that when you buy or lease, a piece of qualifying equipment, you can deduct the full purchase price from your gross income at the end of the year. This incentive was created by the U.S. government and was put in place to encourage businesses to buy equipment and invest in themselves throughout the year.

 

For example, say your business buys a piece of equipment for $40,000. Typically, a business owner would write the equipment off a little at a time. Maybe, $10,000 for four years. While any business owner knows that a small write off is better than no write off, most of them would prefer to write off the entire purchase price during the year that they buy it. With Section 179, a business can write off the entire amount. Also, the entire cost of equipment, software, and vehicles (which must total $500,000 or less) can be written-off on your 2013 tax return.

 

According to Section179.org, you may have previously known this deduction as the “SUV Tax Loophole” or the “Hummer Deduction” because many businesses used to use this tax code to write-off certain vehicles that qualified. At the time, they were mostly SUV’s and Hummers. But, that particular benefit of Section 179 has been severely reduced in the past few years, you are still able to write off vehicles, but there have been several limits added on business vehicles.

 

Limitations of Section 179

 

Section 179 does come with limits – there are caps to the total amount allowed to be written off. In tax year 2013, the deduction limit is set at $500,000, which has increase from $125,000 since 2012. The limits on the total amount of equipment purchased is $2,000,000 for this year, 2013.

 

Information for this article was found on the Section 179 website, where you can also learn more about this topic: http://www.section179.org