Section 179 Tax Deduction

What is Section-179?

  • Section-179 of the IRS tax code allows businesses to deduct the full cost of new or used equipment from their 2020 taxes!
  • Deduct the full purchase price of qualifying equipment or software leased or financed during the tax year.
  • This means if you finance or lease a piece of qualifying equipment, you can deduct the full purchase price from your gross income.
  • It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves, making a huge difference to your company‚Äôs bottom line.

Increased 2020 Tax Deduction Limit to $1,040,000

  • The new 2020 Section 179 deduction limit is $1,040,000.
  • Good on new and used equipment & off-the-shelf software.

Spending Cap on Equipment Purchases is $2,590,000

  • This is the maximum amount that can be spent on equipment before the Section-179 Deduction begins to reduce on a dollar-for-dollar basis.
  • This spending cap makes Section-179 a true small business tax incentive. This makes it a very effective tax deduction for small and medium businesses, who typically will not hit $2,590,000 in purchases in any given year.
  • The full deduction can be claimed until the $2,590,000 equipment purchases limit is reached. Once that limit is reached, the deduction decreases on a dollar for dollar basis, and reaches zero once $3,630,000 worth of equipment is purchased.

100% Bonus Depreciation

  • Bonus Depreciation is generally taken after the Section-179 spending cap is reached and is available for new and used equipment.
  • The bonus depreciation is made retroactive to 9/27/2017!

To take advantage of Section 179 for 2020, the equipment must be purchased and put into service/installed by midnight 12/31/2020. To claim the deduction, use Form 4562.