Reminder to Take Advantage of Section 179 Deductions
Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment (e.g., a 3D printer) 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.
2018 Deduction Limit = $1,000,000
This deduction is good on new and used equipment, as well as off-the-shelf software. To take the deduction for tax year 2018, the equipment must be financed/purchased and put into service between January 1, 2018 and the end of the day on December 31, 2018.
2018 Spending Cap on equipment purchases = $2,500,000
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” (because larger businesses that spend more than $3.5 million on equipment won’t get the deduction.)
Bonus Depreciation: 100% for 2018
Bonus depreciation is offered some years, and some years it isn’t. Right now in 2018, it’s being offered at 100%.
The most important difference between Section 179 and Bonus Depreciation is both new and used equipment qualify for the Section 179 Deduction (as long as the used equipment is “new to you”), while Bonus Depreciation has only covered new equipment only until the most recent tax law passed. In a switch from recent years, the bonus depreciation now includes used equipment.
Bonus Depreciation is useful to very large businesses spending more than the Section 179 Spending Cap (currently $2,500,000) on new capital equipment. Also, businesses with a net loss are still qualified to deduct some of the cost of new equipment and carry-forward the loss.
When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation – unless the business had no taxable profit, because the unprofitable business is allowed to carry the loss forward to future years.
The above is an overall, “simplified” view of the Section 179 Deduction for 2018. For more details on limits and qualifying equipment, as well as Section 179 Qualified Financing, please read the entire website carefully.
Example of Section 179 at work during this 2018 tax year:
Check out the Section 179 Deduction Calculator for 2018 to help you figure out how much you can save!