What Is Section 179?

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).

Taking advantage of a deduction like this is a resourceful way to replace or acquire machinery. It also helps your bottom line which helps you, your employees, and the long-term future of your company.

How Does Section 179 Work?

The Section 179 Deduction lets you depreciate 100% of the cost of the equipment that is acquired and put into service this year up to $1,050,000.

  • The qualifying equipment must be purchased and put into service by midnight on December 31, 2021. 

  • 2021 Deduction Limit is $1,050,000. This deduction is good on new and used equipment, as well as off-the-shelf software. 

  • 2021 Spending Cap on equipment purchases is $2,620,000 

This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced on a dollar for dollar basis. 

See How Qualified Equipment Can Help Reduce Your 2021 Taxes

Scenario 1:
No Equipment Purchase

Taxable Income: $500,000
Tax Rate: 21%
Tax Liability: $105,000
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Scenario 2:
$200K Equipment Purchase*

Taxable Income: $500,000
Less Equipment Purchase: $200,000
Taxable Income After Purchase: $300,000
Tax Rate: 21%
Tax Liability: $63,000
Total Amount Saved: $42,000
*This is a potential tax savings scenario. You should seek accounting and tax advice from a professional.

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