The Section 179 Deduction

News Alert: Section 179 Limit  = $25,000 For 2015

As of midnight of January 1, 2015, the Section 179 limit has been reduced to $25,000 and no bonus depreciation is available for the 2015 tax year.

However, if prior years are any indication, the expanded Section 179 limits could be restored by Congress during 2015. Bookmark this site, as we will have full details as they become available.

In the meantime, Section 179 can still help you with 2015 equipment purchases.  Use this updated Section 179 Calculator for 2015 to see how much the tax deduction can already save your company.

Important 2014 Section 179 Tax Information

H.R. 5771: Tax Increase Prevention Act of 2014 (aka Tax Extenders Act) retroactively reinstated the limit on Section 179 to $500,000 as well as reinstated 50% Bonus Depreciation thru 12/31/2014. The measure was passed by the House on Dec 3, 2014, the Senate on Dec 16, 2014, and signed into law by the President on Dec 19, 2014. Technically, H.R. 5771 was a one-year, retroactive extension of the tax breaks covering the entirety of 2014. Click here for the fully updated Section 179 Calculator for tax year 2014.

Section 179 At A Glance (Updated For Tax Year 2015)

2015 Deduction Limit  = $25,000

This deduction is good on new and used equipment, as well as off-the-shelf software. This limit is only good for 2015, and the equipment must be financed/purchased and put into service by the end of the day, 12/31/2015.

2015 Spending Cap On Equipment Purchases = $200,000

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. This spending cap makes Section 179 a true "small business tax incentive".

Bonus Depreciation: Not Available In 2015

In prior years, Bonus Depreciation would be taken after the Section 179 Spending Cap is reached. Note: Bonus Depreciation was available for new equipment only; in 2015, Bonus Depreciation is not available at all.

The above is an overall, "simplified" view of the Section 179 Deduction for 2015. For more details on limits and qualifying equipment, as well as Section 179 Qualified Financing, please read this entire website carefully. We will also make sure to update this page if the limits change.

What Is The Section 179 Deduction?

Most people think the Section 179 Deduction is some mysterious or complicated tax code. It really isn't, as you can see below.

Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchase or financed during the tax year. That means that if you buy (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.

Several years ago, Section 179 was often referred to as the "SUV Tax Loophole" or the "Hummer Deduction" because many businesses have used this tax code to write-off the purchase of qualifying vehicles at the time (like SUV's and Hummers). But, that particular benefit of Section 179 has been severely reduced in recent years, see 'Vehicles & Section 179' for current limits on business vehicles.

Today, Section 179 is one of the few incentives included in any of the recent Stimulus Bills that actually helps small businesses. Although large businesses also benefit from Section 179 or Bonus Depreciation, the original target of this legislation was much needed tax relief for small businesses - and millions of small businesses are actually taking action and getting real benefits.

Essentially, Section 179 Works Like This...

When your business buys certain items of equipment, it typically gets to write them off a little at a time through depreciation. In other words, if your company spends $50,000 on a machine, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example).

Now, while it's true that this is better than no write-off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it.

In fact, if a business could write off the entire amound, they might add more equipment this year instead of waiting over the next few years. That's the whole purpose behind Section 179 - to motivate the American economy (and your business) to move in a positive direction. For most small businesses, the entire cost can be written-off on the 2015 tax return (up to $25,000).

http://www.section179.org/