Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income.
As the clock winds down in 2018, businesses are scanning the field for ways to close out the year on a winning note.
Small business owners or managers may not be aware of an incentive that could forge a huge technology and productivity boost in their immediate future: Section 179 Deduction of the IRS Tax Code.
This deduction could be a BIG gift for any small to medium sized business looking to make a technology purchase by year-end. But interested parties must move fast. Details are very clearly lined out in the Section 179 Deduction website.
The Deduction Defined
Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income.
It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves.
The Deduction Details
2018 Deduction Limit: $1,000,000 for the total written off
Spending Cap on Equipment Purchases for 2018: $2,500,000
The deduction begins to phase out on a dollar-for-dollar basis after $2,500,000 is spent by a given business (thus, the entire deduction goes away once $3,500,000 in purchases is reached), so this makes it a true small and medium-sized business deduction.
Bonus Depreciation: 100% for 2018
The most important difference between Section 179 and Bonus Depreciation is both new and used equipment qualify for the Section 179 Deduction (as long as the used equipment is “new to you”), while Bonus Depreciation has only covered new equipment only until the most recent tax law passed. In a switch from recent years, the bonus depreciation now includes used equipment.
Bonus Depreciation is useful to very large businesses spending more than the Section 179 Spending Cap (currently $2,500,000) on new capital equipment. Also, businesses with a net loss are still qualified to deduct some of the cost of new equipment and carry-forward the loss.
So What's Next?
If you're interested in reviewing your own incentives in purchasing, financing, or leasing qualified equipment/software for 2018, try out this online calculator. It can help you visualize a "potential" tax benefit scenario leveraging Section 179 of the IRS Tax Code.
If you're interested in taking advantage of this incentive and boost, please give us a call. We've been in business for more than 60 years and have provided in-house leasing services since 1975 through the Datamax Leasing Division. By leasing with Datamax, you can take advantage of technology to grow your business now instead of waiting.
