Section 179 tax deduction
The Section 179 tax deduction can boost your bottom line
Owners of businesses of all sizes have been impacted by the Tax Cuts and Jobs Act, which created new tax cuts and changed standard deductions used by companies for years, including the Section 179 tax deduction. Fortunately, the Section 179 deduction is still available, but you need to verify you're using it correctly first.
Section 179 at a glance
The Section 179 tax deduction provides a business owner with a tax break as soon as they buy, lease or finance new equipment, specifically high-ticket items such as office equipment, computers, machinery and vehicles. A business owner must depreciate the equipment over a length of time when this deduction is not used, instead taking a smaller deduction annually for many years.
What's new this year
Under the new act, the maximum amount a business owner is able to deduct for property that falls under Section 179 doubled, increasing to $1 million. For property that costs more than $2.5 million, the deduction limit is lowered. This is also up from the $2 million-dollar mark of previous years.
A note on bonus depreciation
Bonus depreciation was also impacted by the Tax Cuts and Jobs Act. This works in conjunction with the Section 179 tax deduction and is often used to depreciate beyond the limit of Section 179. Under the act, bonus depreciation has increased from 50 percent of the cost to 100 percent from now until the year 2020. It has also been expanded to include used property.
Even though the 100 percent depreciation with no phase out on the bonus may seem the way to go as opposed to Section 179, it's important to note that bonus depreciation has to be applied to all assets bought within their given life. This means that if you bought eight printers with a class life of five years, you'd need to bonus all of them instead of taking the Section 179 deduction on each individual one.
Section 179 may be the answer you've been looking for
Using depreciation over a period of years instead of the Section 179 deduction is effective in some situations. However, if your business has had a strong year and you need to lower your tax bill, the Section 179 deduction can help. You can lease, buy or finance the equipment you need for your business and write it off on your taxes right away.