What is the Section 179 Deduction

Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased 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.

Here’s How Section 179 works:

In years past, when your business bought qualifying equipment, it typically wrote it 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.

And that’s exactly what Section 179 does – it allows your business to write off the entire purchase price of qualifying equipment for the current tax year.

This has made a big difference for many companies (and the economy in general.) Businesses have used Section 179 to purchase needed equipment right now, instead of waiting. For most small businesses, the entire cost of qualifying equipment can be written-off on the 2019 tax return (up to $1,000,000).

Who Qualifies for Section 179?

All businesses that purchase, finance, and/or lease new or used business equipment during tax year 2019 should qualify for the Section 179 Deduction (assuming they spend less than $3,500,000).

Most tangible goods used by American businesses, including “off-the-shelf” software and business-use vehicles (restrictions apply) qualify for the Section 179 Deduction.

For basic guidelines on what property is covered under the Section 179 tax code, please refer to this list of qualifying equipment. Also, to qualify for the Section 179 Deduction, the equipment and/or software purchased or financed must be placed into service between January 1, 2019 and December 31, 2019.

Section 179’s “More Than 50 Percent Business-Use” Requirement

The equipment, vehicle(s), and/or software must be used for business purposes more than 50% of the time to qualify for the Section 179 Deduction. Simply multiply the cost of the equipment, vehicle(s), and/or software by the percentage of business-use to arrive at the monetary amount eligible for Section 179.

Section 179 Qualifying Property:

Section 179 was designed with businesses in mind. That’s why almost all types of “business equipment” that your company buys or finances will qualify for the Section 179 deduction.

All businesses need equipment on an ongoing basis, be it machinery, computers, software, office furniture, vehicles, or other tangible goods. It’s very likely that your business will purchase many of these goods during the year, and will do so again and again. Section 179 is designed to make purchasing / leasing that equipment during this calendar year financially attractive.

Material goods that generally qualify for the Section 179 Deduction:

Please keep in mind that to qualify for the Section 179 Deduction, the equipment listed below must be purchased and put into use between January 1 and December 31 of the tax year you are claiming.

•  Equipment (machines, etc.) purchased for business use
•  Tangible personal property used in business
•  Business Vehicles with a gross vehicle weight in excess  of 6,000 lbs (see Section 179 Vehicle Deductions)
• Computers
• Computer “Off-the-Shelf” Software
• Office Furniture
• Office Equipment
•  Partial Business Use (equipment that is purchased for business use and personal use: generally, your deduction will be based on the percentage of time you use the equipment for business purposes).
• Certain improvements to existing non-residential buildings: fire suppression, alarms and security systems, HVAC, and roofing.

Please note – the above equipment qualifies whether new or used (but must be new to you), and also regardless of whether it was purchased outright, leased, or financed.