What is Section 179 Tax Deduction?
Section 179 of the United States Internal Revenue Code is a tax deduction that enables businesses to depreciate assets as an expense in the first year or the year they purchased an asset. All assets must be put to use by December 31 of the 2020 tax year.
Why should I care about this tax deduction?
In 2020, your business can deduct the full cost of qualified equipment purchases, up to $1,040,000, with a “total equipment purchase” limit of $2,590,000.
Besides, you can take advantage of 100% Bonus Depreciation on the “new to you” equipment this year.
How to calculate my savings from Section 179?*
A rule of thumb is to multiply the price of your equipment by your tax bracket. For example,
|First Year Write-Off||$1,040,000|
|100% Bonus Depreciation||$110,000|
|Normal First-Year Depreciation||$0|
|Total First Year Deduction||$1,150,000|
|Cash Savings (assuming a 35% tax bracket)||$402,500|
|Equipment Cost After Tax $747,500||$747,500|
What qualifies as Tax Deductible assets under Section 179?
- Tangible property or hard assets (such as machines, equipment, furniture)
- Single-purpose agricultural or horticultural structures
- Storage facilities
- Off-the-shelf computer software placed in service during the tax year
What are the requirements?
- New or Used equipment with a total price of up to $2,590,000
- Must be acquired for business use
- Must be put to use before December 31st, 2020
How can I benefit from this Tax Deduction?
*The information on this site is for illustrative purposes only. Please consult with a qualified tax advisor concerning your specific situation.