Equipment Tax Deduction for Businesses in 2018 – Tax Code 179
Let’s face it, we all love loopholes, exceptions, incentives, discounts and savings, and especially that much more when Uncle Sam decides he will pick up the tab for us. But funnily enough, most people have never even heard of Tax Code 179, to many it sounds like a line in an endless thousand page book of boring tax law buried in a cellar somewhere with cobwebs, never to be read except by your local CPA down the street. But actually this is not the case at all, Tax Code 179 was designed to help businesses both large and small expand and grow!
What is Tax Code 179?
Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment 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 from your gross income. It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves!
What Has Changed?
In years past, when your business bought qualifying equipment, it typically wrote it off a little at a time through depreciation. In other words, 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 as 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.
And that’s exactly what Section 179 does – it allows your business to write off the entire purchase price of qualifying equipment for the current tax year.
This has made a big difference for many companies (and the economy in general.) Businesses have used Section 179 to purchase needed equipment right now, instead of waiting. For most small businesses, the entire cost of qualifying equipment can be written-off on the 2018 tax return (up to $1,000,000).
What Qualifies for Tax Code 179?
Please keep in mind that to qualify for the Section 179 Deduction, the equipment listed below must be purchased and put into use between January 1 and December 31 of the tax year you are claiming. According to Section179.org here is a list of qualifying material goods:
- Equipment (machines, etc.) purchased for business use
- Tangible personal property used in business
- Business vehicles with a gross vehicle weight in excess of 6,000 lbs (see Section 179 Vehicle Deductions)
- Office furniture
- Office equipment
- Property attached to your building that is not a structural component of the building (i.e.: a printing press, large manufacturing tools and equipment)
- Partial business use (equipment that is purchased for business use and personal use: generally, your deduction will be based on the percentage of time you use the equipment for business purposes).
- Certain improvements to existing non-residential buildings: fire suppression, alarms and security systems, HVAC, and roofing.
Please note – the above equipment qualifies whether new or used (but must be new to you), and also regardless of whether it was purchased outright, leased, or financed.
Use it or lose it!
The federal government provides numerous incentives to small medium and large businesses every year to help them grow, if they grow and flourish the idea is the economy as a whole will do better, so these incentives are not meant to be kept secret but actually designed to be used! Hearing about it is one thing and taking action is quite another, so if you are just learning about tax code 179, don’t be afraid to ask your CPA or tax professional about this write off, and how it could benefit your practice or business. Remember this code changes every year and if you don’t use it, you will lose it! All equipment purchases whether, new or used, whether bought outright or leased qualifies up until end of the year. This is an exceptional opportunity to take advantage of the government’s generosity and grow your business, so stop thinking about it and do it! Because there probably won’t be a better time.