Tax Deductions? Yes please!
There are few things in life that people agree on; the fact that taxes elicit a general feeling of “blahhh” is one of them. But then, most people would all agree that they love their tax return. And what about tax deductions? Those aren’t too shabby, either. If you’re a small business, Section 179 deductions on your taxes is something most can agree they like.
So, what is a Section 179 Deduction?
Section 179 of the IRS code gives businesses the ability to deduct the purchases of equipment that they bought during the tax year.
What does this mean for you? If purchased/lease equipment qualifies under section 179, you can deduct the entirety of that purchase from your gross income. This incentive was put into effect to encourage businesses to invest in themselves and grow.
Sometimes it’s jokingly called “Hummer Deduction”, as people would use the tax code to write-off vehicles purchases.
Because of that vehicle-buying tendency, the deduction underwent some reductions. It’s now more beneficial to small businesses that look to return money into their company via equipment and vehicle purchases.
How Does It Work?
Before the recent updates, when a business would buy equipment, they were able to write that equipment off their taxes little by little using depreciation. For example, say your company bought a $100,000 machine. For the next five years, they wrote off $20,000 per year.
Section 179 now allows the entire purchase of the $100,000 to be written off all at once. This makes a big difference for smaller companies that couldn’t pay the taxes of such a large purchase up front.
The total cost of a qualifying purchase can be completely written off for up to $1 million as of January 2018.
The plan does come with restrictions – the entire purchase is written off with up to $1 million, and then begins to adjust on a dollar by dollar basis on a scale. When $3.5 million is reached, the deduction is eliminated all-together, which is a real testament to the idea that section 179 is geared toward small business.
You will need to show your records of all the purchases that you’re writing off, including the purchase date and all the other costs involved with the purchase, like setup or freight fees.
You can see if your equipment qualifies to be deducted through Section 179 by looking at the list of qualifying items.
These items include, but are not limited to:
- Business vehicles with a weight in excess of 6,000 pounds
- Equipment such as machines
- Computer Software
- Office equipment and furniture
- Improvements to office buildings such as alarms and security systems
- The property that you’re writing off must be written off in the year that you purchased that equipment. This section does not apply retroactively.
Section 179 could be subject to change, as it has evolved over the years. Laws are constantly under revision, so now is a great time to take advantage of all your purchasing power and act quickly. Leverage this tax relief while the chance is still available.
Take out an equipment loan with the peace of mind knowing that you will be able to write off the purchase of those vehicles you’ve always needed on your taxes. TopMark Funding knows just how to help you get the best deal possible, before time runs out on this excellent tax break.