Section 179 for Equipment Financing & Leasing

Section 179 of the Internal Revenue Code is a tax deduction allowing businesses to deduct the full purchase price of qualifying equipment financed or leased during the tax year. This deduction was designed to encourage small and medium-sized businesses to invest in their growth by providing financial incentives to purchase or lease necessary equipment.

YES. You can finance your equipment and still write off the purchase under IRS179!

Tax Benefits

1. Immediate Deduction:

One of the primary benefits of Section 179 is that it allows businesses to deduct the full purchase price of qualifying equipment in the year it was purchased or leased. This deduction can significantly reduce the overall tax liability for businesses.

2. Qualifying Equipment:

Many types of tangible business equipment can qualify for Section 179 deductions. This includes machinery, vehicles, computers, software, office furniture, and more, provided they are used for business purposes.

3. Higher Deduction Limit:

The deduction limit under Section 179 changes periodically due to updates in tax laws. For instance, in recent years, businesses could deduct up to $1,050,000 of the equipment's cost in a single tax year, with a spending cap of $2,620,000 before the deduction amount is reduced.

Key Takeaways

  • Eligibility: Small and medium-sized businesses that invest in qualifying equipment can benefit from Section 179 deductions.

  • Immediate Deduction: The ability to deduct the full purchase price of equipment in the year it was acquired can significantly reduce tax liabilities.

  • Limits and Caps: There are limits to the total amount that can be deducted and spent on equipment to qualify for the full deduction.

In Practice Example

Let's say a small business purchases manufacturing equipment for $150,000. With Section 179, the business can deduct the entire $150,000 from its taxable income in the same tax year the equipment was bought, reducing the overall tax liability. This deduction can lead to substantial savings for the business.

Please note that the information provided here is for illustrative purposes only and should not be considered as tax advice. It's recommended to consult with a qualified tax professional or accountant for specific guidance tailored to your business's circumstances.