The end of 2016 is rapidly approaching, and with construction booming this year it’s time to think about tax season. This can be a challenging time when you dig through those receipts and figure out what’s deductible. Fortunately for small- to medium-size businesses across the U.S., there’s Section 179.
Section 179 is part of the U.S. tax code requiring yearly Congressional review and approval and, yes, it sounds boring, but there’s nothing boring about a $500,000 tax deduction. Congress reauthorized the Section 179 tax deduction and the limit is $500,000 for tax years 2016 and 2017—a huge change from its sad $25,000 low in 2014.
The biggest advantage of Section 179 deduction is that it allows businesses to deduct the full purchase amount of qualifying equipment in the given year. Before Section 179, you’d have to depreciate the deduction over a number of years. For example, if you bought computer software for your business that cost $10,000, previously, you would have had to file using a 5-year depreciation schedule with a $2K deduction per year. Now, under Section 179, you can deduct the full purchase price of the qualifying equipment in the year you purchased it, even in December.
Another benefit of Section 179 is that equipment that’s “new to you” qualifies for the deduction. So, if you buy used equipment because you’re a scrappy new venture or if you’re just trying to save some pennies, you can still take the Section 179 deduction.
- Equipment (machines, etc.) purchased for business use
- Tangible personal property used for business
- Business Vehicles with a gross vehicle weight more than 6,000 lbs. (Section 179 Vehicle Deductions)
- Computer “Off-the-Shelf” Software (On-Screen Takeoff®, Quick Bid®, Digital Production Control®, Oasis Takeoff®*, and Oasis Field Center®* qualify)
- Office Furniture and Equipment
- Property attached to your building that is not a structural component of the building (e.g., a printing press, large manufacturing tools or equipment)
- Partial business-use equipment (that is, equipment purchased for business and personal use, generally, deducted based on the percentage of time the equipment is used for business purposes)
Talk to your account representative for details.
Here’s a handy calculator to give you an idea of what the savings from the deductions could be: Section 179 Calculator
For more information, check out Section179.org, which has news, history, and more information on qualifying purchases.