Most people think the Section 179 deduction is some mysterious or complicated tax code. It really isn’t, as you will see below.
It allows businesses to deduct the full purchase price of business equipment ( such as computers, software, office furniture or other tangible goods) 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 on a dollar for dollar basis on your taxes. It’s an incentive created by the U.S. government to encourage small businesses to buy equipment and invest in themselves.
When your business buys certain equipment, it gets to write them off a little at a time through depreciation. So, if your company spends $50,000 on a machine, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example).
Now, while it’s true that this is better than no write-off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it.
In fact, if a business could write off the entire amount, they might add more equipment this year instead of waiting over the next few years. That’s the whole purpose behind Section 179 – to motivate the American economy (and your business) to move in a positive direction. Consequently, most small businesses can write off the entire cost on the 2016 tax return, up to $500,000!
Examples of items that may qualify for the Section 179 deduction:
In summary, Section 179 offers small and mid-size businesses a great opportunity to maximize purchasing power. The lack of certainty over Section 179 in prior years has influenced many entrepreneurs to delay large investments in equipment. Thus, the more liberal and stable expensing levels in 2016 allow them to invest with confidence.
Finally, most of the equipment your business will purchase, finance or lease qualifies for the deduction. So, make sure you do your homework to verify that your company is leveraging the Section 179 Deduction this year. Contact eMazzanti Technologies to discuss your Section 179 technology investment options.