It’s coming to the end of the year, and if you still haven’t started claiming your tax savings for 2019 it’s time to begin as soon as possible. Luckily, there is still plenty of time to get your claims in for Section 179 Deduction and the bonus depreciation.
These tax savings will save you and your business money while receiving money back for the purchases you made on equipment and software.
In this blog, we will provide all the necessary info regarding Section 179 deduction and how it applies to your business.
What is Section 179 Deduction?
Thanks to Section 179 of the IRS tax code, businesses are allowed to deduct the full purchase price from certain equipment or software purchased during the tax year.
This equipment needs to qualify under section 179 and must be purchased and in operation before December 31st, 2019 in order to be claimed.
When you purchase commercial property or equipment, including a vehicle or machinery, you can get tax deductions on them. These deductions count as depreciation - which is the expense of buying property for your business over a certain length of time. These deductions usually save you and your business money on your tax returns.
When you take a deduction of an asset during its first year, it’s called a Section 179 deduction. Under this rule, any purchased or leased equipment for your business can qualify for tax deductions up to and including $1 million.
What Are The Limitations of Section 179?
Section 179 does come with its limitations. There are caps on the total amount that can be written off, as well as a limit to the total amount of equipment that can be purchased. If your purchase exceeds $2.5 million, you will need to reduce the $1 million maximum allowance for every dollar over that $2.5 million mark.
It is aimed at more small or medium-sized businesses, as the entire deduction goes away if the total purchase hits $3,500,000.
Who Qualifies for Section 179?
Any business that purchases or leases new or used equipment for their business during the 2019 tax year should be able to qualify for Section 179 Deduction - as long as they have spent less than $3,500,000.
Most goods used by American businesses qualify for the Section 179 Deduction, including purchases of software, appliances and business-use vehicles.
In order for the equipment or software to qualify for Section 179 Deduction, it must be purchased between January 1, 2019, and December 31, 2019.
Section 179 Bonus Depreciation
As well as tax deductions, you are also eligible to apply for bonus depreciation (after the spending cap has been reached) to any recently purchased or leased equipment.
Bonus depreciation is incredibly useful to large businesses who will need to spend more than the Section 179 spending cap ($2,500,000) on new equipment.
How Much Can You Save?
By combining both the Section 179 Deductions and the bonus depreciation, you can make substantial savings on equipment and software purchases for your business.
These tax subsidies can give you up to a 35% reduction in the cost of new and used equipment throughout the year.
Act Now Before It’s Too Late!
2019 is almost over and there is little time to claim these tax incentives before this year’s deadline passes.
Now’s the time to make the most of your 2019 tax savings. To learn more, please give us a call at 510-429-0303.
Locations: Union City, Castroville, Sacramento, Stockton and Modesto
Note: This information should not be considered tax advice from Pacific Material Handling Solutions. If you have specific questions about Section 179 of the tax code, you should contact the IRS or your tax advisor for details.