Section 179 Deduction of the IRS Tax Code is an immediate expense deduction that business owners can take for purchases of depreciable business equipment.
Continuing to invest in new technology equipment to maximize efficiency is a valuable endeavor for organizations looking for a competitive edge. It's even better when you can maximize tax deductions as well.
Section 179 and Bonus Depreciation are two components of the 2017 TCJA (Tax Cuts and Jobs Act) that present potential tax savings for your organization if you're in the market for copiers, printers, or other related technology hardware or software. To maximize the current incentive, qualifying equipment must be financed or purchased before January 1, 2024. Also of note: Beginning Jan. 1 of this year, bonus depreciation has begun to phase out over the next four years.
In short, it's a tax code created to help businesses.
Section 179 Deduction of the IRS Tax Code is an immediate expense deduction that business owners can take for purchases of depreciable business equipment. If you buy (or lease) a piece of qualifying equipment (or software), you can potentially deduct the full purchase price from your gross income.
According to the Internal Revenue Service, Bonus Depreciation allows business taxpayers to deduct additional depreciation for the cost of qualifying business property, beyond normal depreciation allowances. As it phases out beginning this year, Bonus Depreciation for 2023 is 80%.
While this blog is intended to help you better understand the benefits of Section 179 and Bonus Depreciation, it is intended for informational purposes only. Before moving forward, we strongly recommend seeking out the consultation of your qualified tax expert to help you navigate the process.
For Section 179, almost all types of equipment used specifically for business that your company buys or finances will qualify for the Section 179 Deduction. Read more details on qualifying property here. According to Section179.org, this includes:
Yes, in both instances, used equipment qualifies.
This deduction is good on new and used equipment, as well as off-the-shelf software. To take the deduction for the tax year 2023, the equipment must be financed or purchased and put into service between January 1, 2023, and the end of the day on December 31, 2023.
This is up from $3.78 Million in 2022. This is the maximum amount 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.
Software is typically classified as an intangible asset for tax purposes. However, not all software falls under the same rules for depreciation. There are instances where software is eligible for depreciation and times when it isn’t, depending on how it was acquired and its intended use. If the software was acquired in connection with the acquisition of a significant part of a business, it generally cannot be depreciated. But, according to Section179.org, if the software is:
In those cases, it can be depreciated and may qualify for the Section 179 deduction.
Yes. Using Section 179 with an Equipment Lease or an Equipment Financing Agreement might be a highly profitable decision for your organization.
Benefits include:
Interested in crunching the numbers? This handy online calculator will help you visualize a potential tax benefit scenario by leveraging Section 179 of the IRS tax code.
If you're interested in taking advantage of this incentive and reaping the benefits of these tax incentives, we'd love to visit. Additionally, our in-house leasing services offer an added "bonus" to your acquisition journey. With Datamax, you can “lease with ease” and take advantage of technology to grow your business now instead of waiting.