Every business needs tools and equipment to operate. Regardless of your specific industry you’ll likely use smartphones, laptops, vehicles, software, etc. The Section 179 tax deduction outlines several write-off incentives that can benefit your business when buying or upgrading equipment to help streamline your operations.
What is Section 179?
Currently, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying tools, equipment and software purchased or financed during that tax year. Meaning if you buy or lease any qualifying asset, you can deduct the full purchase price from that year’s gross income.
And the 2021 update to Section 179 makes it more beneficial to small businesses than ever before! It is one of the few tax laws available to small- and medium-sized businesses (SMBs) that specifically benefits small businesses.
How it Works
In the past, any qualifying assets businesses purchase would get written off over time, a small amount each year through depreciation. For example, if your company purchases a machine for $50,000, it would have written off $10,000 a year for five years.
However, most business owners would prefer to write off the entire purchase price in the year that they buy it. And since the passing of the Tax Cuts and Jobs Act, the Section 179 deduction allows your business to write off the entire purchase price of qualifying assets within that current tax year.
For 2021, you can deduct up to $1,050,000 in new or used assets with a spending cap of $2,620,000. “Under the Tax Cuts and Jobs Act, first-year bonus depreciation at 100% will remain in effect until January 1, 2023,” states AgDirect. After which that amount will decrease 20% each year through 2027.
This allows businesses to use Section 179 to purchase necessary assets right away, instead of waiting. Most small businesses can write off the entire cost of qualifying new or used equipment when filing their 2021 taxes (up to $1,050,000).
Where to Start
Section 179’s tax incentives make now the best time to consider buying, leasing or upgrading necessary business assets like service management software, tools or equipment.
This deduction can provide your business the necessary incentives to purchase assets needed to become more successful. To help break down the details of Section 179, we’ve created a guide with all of the important information you need to get started. Use the form below to download this useful guide!
* Please note this article and downloadable guide are intended solely as general tax information and not to be considered professional tax advice. To learn more about the Section 179 tax deduction, please refer to irs.gov and section179.org. Please speak with a licensed tax professional to understand the guidelines of Section 179 and how your business can benefit.