Not many people look forward to tax season, but section 179 may the silver lining for many SMBs. If you’re a new business owner, or have just never heard of this deduction before, continue reading to learn more.
First, let’s review some key pieces of info…
This post’s main takeaway? The stats listed above.
As we near tax time, many businesses may be trying to find the balance between using the money they’ve been allotted for upgrades and business needs in their annual budget, with saving money. The perk of section 179 is that it allows you to invest in your company and receiving significant savings at tax time. These savings can help make the equipment or software you purchased in 2022 more affordable.
What is section 179?
If you are a small or medium business, Section 179 may be one of the most important tax codes to become familiar with. Section 179 is a tax code that allows businesses to deduct all or part of qualifying equipment and/or software that is purchased or leased by December 31, 2022 from your gross income. This incentive was created to encourage SMBs to invest in themselves.
How Does Section 179 Work?
Businesses are currently allowed to deduct up to $1,050,000 on qualifying equipment/software, with the limit on purchases being capped at $2,620,000. Furthermore, the bill also allows businesses to depreciate up to 100 percent of the cost of eligible equipment that is bought or leased before 2022. Additionally, bonus depreciation can now be applied to used equipment as well.
How Can I get the Section 179 Tax Deduction?
The deduction applies to businesses that have placed new or used equipment and/or software into service in 2021. However, this deduction does not come automatically. To receive the deduction, a business must to complete Part 1 of IRS form 4562. It is important to note, this form must be included with your tax return.
What types of Equipment/Software qualify for the tax deduction?
Great question! Below are some examples of items that would qualify for the Section 179 tax deduction.
- Office Equipment (I.E: Copiers/Printers/MFPs)
- Office Furniture
- Business vehicles in excess of 6,000lbs
- Computer Software
- Equipment/Machines purchased for business use
- Certain improvements to non-residential buildings
- This can include fire suppression, alarms, security systems, and HVACs
This information provided in this blog has been made available for education purposes only. It is not intended to provide, or be used as, a tax, legal, investing, or accounting service. Always speak with your accountant, tax advisor, or lawyers before making any business decision.
To find the most up to date information, visit the IRS website.