If you’ve been considering investing in equipment or software for your small to medium-sized business, do it now. Thanks to Section 179 of the IRS Tax Code, you could be looking at a hefty write-off on your 2018 taxes — but time is running out!
The way it works is surprisingly straightforward. Section 179 allows businesses to deduct, from gross income, the full purchase or lease price of new or “new to you” equipment, business-use vehicles, and/or software purchased or financed during the tax year. This incentive makes it possible for many companies to buy the equipment they need right now and write off the entire cost (up to $1 million) on their 2018 tax return, rather than deducting a portion of the value over a period of years, as with depreciation.
What's the Catch?
While all businesses that purchase, finance, and/or lease new or used business equipment during tax year 2018 can qualify, Section 179 does have some limits:
- There is a $1 million cap on the 100 percent deduction.
- There is a $2.5 million limit that can be spent on equipment before the Section 179 deduction available to your company begins to be reduced on a dollar-for-dollar basis up to $3.5 million.
- Enterprises that spend more than $3.5 million on equipment aren’t eligible for this deduction.
- The equipment and/or software must be purchased or financed and placed into service between January 1, 2018 and December 31, 2018.
- The purchases must be used for business purposes more than 50 percent of the time to qualify for the deduction. Simply multiply the cost of the equipment, vehicle, and/or software by the percentage of business use to find the dollar amount eligible for Section 179.
- To learn what equipment and business-use vehicles qualify for the Section 179 deduction, please see this list.
Historically, most tax incentives target enterprise-level business, but Section 179 is one of the few government incentives enacted specifically to encourage small to medium-sized businesses to invest in themselves. Millions are moving to grow their businesses and, at the same time, gain some much-needed tax relief. To learn more, join CEO Ben Johnson and CPA Josh Sprayberry as they dive a little deeper into Section 179 and what it can mean for your business in the videos below. [Please note: Since these videos were produced in 2016, the Section 179 deduction has doubled!]
Liberty Technology is an expert partner in helping small and medium-sized businesses prioritize expenditures and plan for vibrant, steady growth. We’d love to hear your story — where you are now, and where you’d like to be next, and we’ll help you plot a course that will get you there. Reach out today to discuss getting a custom quote built!