Section 179 first appeared as part of the U.S. stimulus package as a way to encourage businesses to buy capital equipment faster. It is one section of the Tax Relief Act of 2010 that really benefits small and medium sized businesses as much as it can help large businesses. In sort, this tax rule allows qualified section 179 equipment purchases to be fully deducted in the first year that they are purchased, financed, or even leased.
- Deduction Limit: The deduction limit is $500,000. Most new and used capital equipment purchases, some software, and even vehicles (within limits) qualify.
- Purchase Limit: Deductions start to phase out after a business spends $2,000,000.
- Bonus Deduction: This allows businesses to deduct an additional 50% of the purchase of new equipment that exceeds Section 179 purchases.
Most of the time, section 179 equipment purchases take the full deduction for the first $500,000 worth of deductions. The bonus deduction might be applied for new equipment if the deduction exceed the Section 178 limits. If a business does not have any income to use the deduction for in the year of purchase, it can carry the deduction over to the next tax year.
What Type Of Equipment Qualifies?
Your print finish equipment must be used more than half the time for business. If you purchase a new laptop for your real estate business, but use it 20% of the time for personal use, simply use 80% of the cost as your deductible expense.
Note that vehicle deductions are limited This is because the first year that the law came out, people started to jokingly refer to it as the “Hummer Law.” Many business owners used this rule to purchase nice cars for their business and personal use. Passenger cars might still qualify, but purchase deductions are limited to $11,060. Vehicles that are more likely to be purchased exclusively for business use can still qualify for the full deduction.
Otherwise, most types of capital equipment and some software qualifies. This includes tangible equipment, print finishing equipment, computers, off-the-shelf software, and furniture. For example, a new UV coating machine and Section 179 would be a great fit. You will not have to worry about exceeding the limit if you just plan to use your purchase of a new uv coating machine and section 179.
Remember To Take Advantage Of Section 179
You can take advantage of this additional tax deduction for purchases put in service during this tax year. The ability to deduct the entire purchase, lease, or financing expense might enable your business to grow much faster. That is exactly what the law was intended to do.