Section 179 is an incentive for small to medium sized businesses to invest in equipment and grow their company through reduced tax liabilities. Under extended Section 179 limits established by the Protecting Americans from Tax Hikes Act of 2015, businesses are allowed to purchase qualifying equipment to immediately depreciate new or used equipment costs.
Additional depreciation for both new and used qualifying equipment is allowed with the use of the standard first year depreciation allowance (under MACRS rules, 20% for equipment with a 5 year class life as defined in IRC Section 168).
The first requirement for section 179 is that you must have purchased and put your equipment in service between Jan. 1st and Dec. 31st of the calendar year. The next requirement is that your total investments for the year must be under $2,000,000 of equipment. Additionally, the maximum amount that you can write off is $1,000,000.
Section 179 is simple to use. All you need to do is buy (or finance) the equipment, and use IRS Form 4562.
Here is an example of how much you will save with the purchase of a machine that totals $50,000:
|Cost Of Equipment And/Or Software:||$50,000|
|Section 179 Deduction:||$50,000|
|50% Bonus Depreciation:||–|
|Regular First Year Depreciation Deduction:||–|
|Total First Year Deduction:||$50,000|
|Cash Savings On Your Purchase:||$17,500|
|Lowered Cost Of Purchase After Tax Savings:||$32,500|