Section 179 was created with businesses like yours in mind. That’s why almost all types of “business equipment” that your company will buy or finance qualifies for the tax deduction.
It is no secret that businesses require equipment on an ongoing basis, whether it’s machinery or other tangible goods. Section 179 was written to make purchasing that equipment during this calendar year financially appealing.
An attractive incentive to the law is that you may be able to take bigger deductions in the year when you first buy and begin using this property. Time is running out this year, so make your decision fast.
Updated Section 179 Tax Deductions for Businesses Explained
The Tax Cuts and Jobs Act of 2017 increased the Section 179 benefit for businesses that buy assets and start using them.
Effective January 1, 2018, businesses can immediately deduct up to $1 million for qualifying purchases of capital property, with a limit of $2.5 million. After 2018, the limits are indexed to inflation. Businesses can now also take this deduction for capital equipment, including:
- Air Compressors
- Generators
What are Section 179 Deductions?
Section 179 of the IRS Code was enacted to help small businesses by allowing them to take a depreciation deduction for certain assets (capital expenditures) in one year, rather than depreciating them over a longer period-of-time.
Annual Limits on Section 179 deductions
There are annual limits on the amount of deduction. For 2018 business tax purposes, the limits are:
- $1 million maximum on individual items of new and used equipment.
- Your business can spend up to a maximum of $2.5 million on Section 179 equipment. The deduction is reduced above this amount.
After 2018, these limits will be indexed to inflation.
If you deduct only part of the cost of qualifying property as a section 179 deduction, you can generally depreciate the cost you do not deduct. This means that you can spread out the remaining amount over the life of the property.
For More Information on Section 179 Deductions
Get more information from IRS Publication 946: Depreciation.
Disclaimer: Section 179 deductions are complicated. The information in this blog, is not intended to be tax or legal advice. Each business situation is different and tax regulations change frequently. Please consult your tax professional before buying property with the intent to take a Section 179 deduction.