As the year comes to a close your small business is analyzing the financial reports for the year, and questioning when to reinvest in the business. Small businesses looking to invest in their growth have a tax benefit available that you may not be aware of. When buying or leasing qualifying equipment, you can deduct the full purchase price from your gross income.
Section 179 of the United States tax code encourages small businesses to purchase equipment and invest in themselves.
How Does Section 179 Work?
Previously, when your business purchased qualifying equipment, you would write off the purchase through depreciation over time. Section 179 changed this, business owners are now able to write off the entire purchase of qualifying equipment for the current tax year.
For the majority of small businesses, the whole cost of qualifying equipment can be written off. However, there are caps on the amount written off of $1,220,000, and limits to the total amount of the equipment purchased $3,050,000. Should the small business reach an amount of $4,270,000 in equipment, the deduction is phased out on a dollar-for-dollar basis after the limit is reached.
What Qualifies for Section 179?
For property to qualify for Section 179 it has to be used more than 50% for business purposes. Leased property can also be considered, but it must be a new acquisition to your business and put into service for the tax year you’re claiming the deduction.
Business Property
Medical Equipment
Equipment purchased for business use
Business vehicles with a gross vehicle weight of over 6,000 pounds
Computers
Office Furniture
Office Equipment
Heavy Construction Machinery
Software
Are there Other Options Besides Section 179?
Bonus depreciation is very useful for larger businesses spending more than the Section 179
cap on new equipment. Though it may not be offered every tax year, it is currently being offered at 60% for 2024.
When your business applies for these deductions Section 179 is generally taken first followed by Bonus depreciation, unless the business has no taxable profit because the unprofitable business is allowed to carry the loss forward.
Conclusion
As the year draws to a close your business is looking toward the future, the improvements, and changes that can be made to optimize efficiency. Section 179 is geared to help small businesses improve through a tax benefit, with a wide variety of qualifying properties as long as the acquisition is new to your business, put into service for the tax year it is being claimed, and falls under the total amount of equipment purchased your business can benefit.
Do you have the perfect piece of equipment in mind with no way to finance it? Capital Infusion has helped hundreds of business owners utilize Section 179 to invest in themselves and deduct the full price of qualified equipment in 2023. Apply now, and see what options your business qualifies for!
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