Find Out How You Can Add Thousands of Dollars To Your Bottom Line With The Section 179 Tax Deduction

What is the Section 179 Deduction?

Most people think the Section 179 deduction is some mysterious or complicated tax code. It really isn’t, as you will see below.

Essentially, Section 179 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. 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.

Several years ago, Section 179 was often referred to as the “SUV Tax Loophole” or the “Hummer Deduction” because many businesses have used this tax code to write-off the purchase of qualifying vehicles at the time (like SUV’s and Hummers). But, that particular benefit of Section 179 has been severely reduced in recent years.

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Today, Section 179 is one of the few incentives included in any of the recent Stimulus Bills that actually helps small businesses. Although large businesses also benefit from Section 179 or Bonus Depreciation, the original target of this legislation was much needed tax relief for small businesses – and millions of small businesses are actually taking action and getting real benefits.

The obvious advantage to leasing or financing equipment and/or software and then taking the Section 179 Deduction is the fact that you can deduct the full amount of the equipment and/or software, without paying the full amount this year. The amount you save in taxes can actually exceed the payments, making this a very bottom-line friendly deduction!

Did you know that your company can lease equipment and still take full advantage of the Section 179 deduction? In fact, leasing equipment and/or software with the Section 179 deduction in mind is a preferred financial strategy for many businesses, as it can significantly help with not only cash flow, but with profits as well.

To elect the Section 179 Deduction you need to fill out Part One of IRS form 4562. If you need help, your tax preparer will be able to help you elect the Section 179 Deduction.

Section 179 works like this:

When your business buys certain items of equipment, it typically gets to write them 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 to give you 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.

In fact, if a business could write off the entire amount, they might add more equipment this year instead of waiting over the next few years. That’s the whole purpose behind Section 179 – to motivate the American economy (and your business) to move in a positive direction.

Small and Medium Businesses Benefit the Most

Section 179 is a true small to medium business tax deduction. The deduction is unaffected until $200,000 in equipment purchases is reached. This means, at current limits, if a business buys $250,000 worth of equipment, their Section 179 deduction is reduced to zero.

What Qualifies For Section 179?

Business equipment of all types including machinery, computers, office furniture, storage tanks, signage, and any other commercial equipment.
Vehicles designed for commercial-use such as 9+ passenger seats, cargo area of at least 6′, or fully enclosed driving compartment with no body section protruding more than 30″ ahead of the windshield.
Vehicles with 6,000+ pounds GVW (gross vehicle weight) qualify for Section 179 but are limited to a $25,000 deduction… basically certain heavy SUVs.
Off-the-shelf software readily available for purchase by the general public with a non-exclusive license and not substantially modified… note, websites do not qualify.
Storage facilities and/or structures utilized for agricultural / horticultural purposes (Small disclaimer: main buildings / plants / offices don’t qualify. Think movable structures, grain silos, and the like.)

The equipment listed above need not be new – it can be used (but new to you). Almost any “portable” (non-permanently installed) piece of business equipment will likely qualify. If you have any questions on whether something you wish to lease or finance will qualify for Section 179, you can always ask us, or reference IRS Publication 946.

2015 Section 179 Tax Deduction Limits

The Section 179 Deduction is currently $25,000 for 2015. This means businesses can deduct the full cost of equipment from their 2015 taxes, up to $25,000, with a “total equipment purchased for the year” threshold of $200,000. Yes, it’s a still good deal for 2015.

About The Limits

Most small and medium businesses will greatly benefit by taking the Section 179 deduction. But to take advantage of it, the equipment must be purchased and put into service by 11:59pm, 12/31/2015 (in other words, when the New Year starts, Section 179 for 2015 is over.)

You select the equipment. We provide the financing.
TLE Equipment Financing offers sound guidance, flexible structuring and competitive financing.
Call today to find out more.

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*This information does not constitute tax advice.
Consult with your tax advisor to determine how to use equipment financing to take advantage of expensing and depreciation tax savings or visit www.irs.gov.