Section 179 Benefits
As business owners, it’s important to stay ahead of the curve with the right equipment. While you don’t have to own the latest and greatest, your equipment has to get the job done. Not having the right equipment can make or break you. Luckily, Section 179 was created to encourage business owners to get the equipment they need and encourage growth by offering tax incentives
Section 179 Explained
What is Section 179?
Section 179 is a section of IRS tax code allows you to deduct the full purchase price of the equipment from your gross income. Section 179 was included in the Stimulus Bill to help give tax relief to business owners. If used correctly, it can effectively change your tax liability (It can help turn around a year in the black.) You don’t want to let these types of opportunities go to waste. Section 179 isn’t guaranteed, every year the stimulus bill has to get reapproved in order for the tax code to apply.
Section 179 for 2024 allows up to $1,220,000 to be deducted, but it varies from year to year.
Get the Answers
Section 179 FAQ
How does it work?
Say you have a excavating company. Previously, you would buy some heavy equipment and slowly write it off on your taxes. Year by year, you get to deduct a little as the equipment depreciates. Lets say- it’s $100,000 piece of equipment, you’ll get to slowly write it off $10,000 at a time, over 10 years. So, the biggest benefit of section 179 is that you get to write off the entire purchase price in the year that you purchased. Why is this such a big deal? Being able to write off the entire amount of the $100,000 heavy equipment will help you discount the equipment $35,000. And that’s not all, you’ll get even more benefits if you finance or lease your equipment.
Why lease or finance?
Why lease or finance if you can afford to pay for the equipment in full? Because you get additional tax deductions. Oftentimes, your entire monthly lease payment is tax deductible and you can save 35% on your monthly payment. The difference between financing and leasing a piece of equipment is that financing only allows for the interest ( paid during the year ) to be deducted. Depending on your type of businesses, leasing might make more sense because of the tax savings rather than buying the equipment outright. However, when you apply the savings you get, you’ll realize the huge amount of discount you’re getting regardless of financing or leasing.
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Should I pay cash for my equipment if I can?
Even if you can afford to pay for your equipment in cash, doesn’t mean that you should. It’s not recommended by us. The tax benefits that come with financing or leasing the equipment just can’t be overlooked.
What kind of equipment qualifies?
New, Preowned, or Refurbished Equipment
- Audio, Video & Broadcast Equipment
- Green Energry
- Heavy Equipment
- IT Equipment
- Manufacturing Equipment
- Medical Equipment
- Office Equipment
- Theater & Cinema Equipment
Are there any downsides or things to watch out for?
One thing that we recommend is working with a reputable lender in order to get the best rates. Often times, the rate gets overlooked and you don’t get the deal you originally imagined.
However, you also want to watch out for Deprecation Recapture . For instance, If you decide to sell your (paid off) equipment after claiming section 179 deductions within 3 years ( the time varies), you’ll owe a partial amount of deductions you received for that piece of equipment. Of course, this all varies and needs to be calculated by your accountant, but it’s just something that you want to watch out for.
We work with dozens of different vendors in every field to offer equipment leasing options.
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Section 179 Calculator
Section 179 can do wonders for your books, especially if your company is in need of positive cash flow.