We get it. Unless you’re an accountant, tax lawyer, or just love obscure and complicated tax laws, Section 179 of the U.S. Tax Code may sound like a real snooze. Even so, this is the perfect time to learn more about this $1 million tax break—especially if you’re a small-to-medium-sized construction business.
Yes, we did say $1 million! Section 179 of the U.S. tax code for 2019 allows contractors to add new software, like takeoff and estimating tools, or equipment and deduct the full cost up to $1 million from their gross income.
While construction workers can deduct everything from safety boots to mileage to the cost of association dues, contractors can also make these great tax-saving moves before the clock strikes midnight on Dec. 31st.
Your Section 179 FAQs
Here are a few FAQs to keep in mind when claiming your Section 179 tax deduction:
1. How much can I write-off?
You can only write off the amount you spend on qualified purchases. For example, if you spend $10,000, you can write off $10,000. Also, you can’t deduct more than your profit. If your business only has $100,000 in profits, you can only deduct $100,000.
2. Is there a “phase-out threshold”?
Yes, it is $2.5 million. This means a business can spend up to that amount in total equipment before the $1 million limits begin to be reduced dollar for dollar.
3. Are there any other rules to be aware of?
Yes, your purchases like software must be used for business purchases more than 50% of the time to qualify for the deduction.
4. How much can I save on my taxes this year?
It depends on how much qualifying equipment and software you purchase and put into use this year. This Section 179 Calculator can show your expected tax savings.
5. What sort of equipment qualifies?
Most tangible business equipment, both new and used, qualifies. The equipment listed below must be purchased and put into use between January 1 and December 31 of the tax year you are claiming. It can be new, used, purchased, leased, or financed:
- Equipment (machines, etc.) purchased for business use
- Tangible personal property used in business
- Business vehicles with a gross vehicle weight in excess of 6,000 pounds
- Computer “off-the-shelf” software
- Office furniture
- Office equipment
- Property attached to your building that is not a structural component of the building
- Partial business use (equipment that is purchased for business use and personal use: generally, your deduction will be based on the percentage of time you use the equipment for business purposes).
- Certain improvements to existing non-residential buildings: fire suppression, alarms and security systems, HVAC, and roofing.
6. What software qualifies?
For basic eligibility, the software must meet all the following general specifications:
Purchased or financed with specific qualifying lease or loan
- Used in your business for income-producing activity.
- Have a determinable useful life.
- Must be expected to last more than one year.
7. What are Section 179 non-qualifying property?
Most normal business equipment will qualify. Here are some examples of the property and equipment that will NOT qualify:
•Real property like land, buildings, permanent structures, and the components of the permanent structures, including paved parking areas and fences.
•Property used outside the United States.
•Property that is used to furnish lodging.
•Property acquired by gift or inheritance, as well as property purchased from related parties.
•Any property that is not considered to be personal property.
8. How long do I have to purchase?
Section 179 always expires at midnight, December 31st. To take advantage of Section 179 this year, you must buy (or lease/finance) by December 31, 2019.
Demo Before You Buy
Now that you know that investing in takeoff and estimating software can help you save on your taxes, why not get started with a free demo? It’s easy to schedule a guided tour with one of our demo specialists today to learn how On Center Software can help you bid and win more work!
*This program does not assume your company will qualify to take advantage of IRS Section #179. Please consult your tax advisor or accountant for additional information. The software must be purchased and placed in service by 12/31/2019.