No matter what kind of business you are, you’re going to need equipment — smartphones, laptops, vehicles, software, etc. Whether you’re buying equipment for the first time or upgrading to more modern equipment, the cost will always be an important factor. Regardless of the type of equipment, the Section 179 tax deduction provides several write-off incentives that can benefit your business. To start, what exactly is Section 179? The Section 179 tax deduction of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. This means that if you buy or lease any piece of qualifying equipment, you can deduct the full purchase price from your gross income. For 2020, you can deduct up to $1,040,000 in equipment with a spending cap of $2,590,000. Bonus depreciation is 100%. Essentially, Section 179 is more beneficial to small businesses than ever. It is one of the few tax laws available to small businesses and provides relief to small businesses.
How it Works
Before, when businesses bought qualifying equipment, they would usually write a small amount off at a time through depreciation. For example, if your company purchases a machine for $50,000, it gets to write off $10,000 a year for five years. Now, however, most business owners prefer to write off the entire equipment purchase price in the year that they buy it. Essentially, that’s the purpose of the Section 179 deduction – it allows your business to write off the entire purchase price of qualifying equipment for the current tax year. This has transformed businesses, and the economy as well. Businesses use Section 179 to purchase necessary equipment right away, instead of waiting. Most small businesses can write-off the entire cost of qualifying equipment on the 2020 tax return (up to $1,040,000).
How to Start
If you’ve been thinking about buying service management software or equipment, now is the time to start the process! Section 179 offers excellent incentives for buying, financing, or leasing new equipment and software. Not only does your business benefit from the deduction, but your business is also able to gain the necessary equipment it needs to become successful. To help facilitate the process, we’ve created a guide with all of the important information you need to get started. Click below to download our guide!
* Please note that this blog post is intended for general information and not intended to be professional advice. To learn more about the Section 179 tax deduction, please refer to irs.gov and section179.org. Please speak with a professional tax accountant to understand the guidelines of Section 179 and how your business can benefit from Section 179.