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Year-end Tax Planning: Section 179 Deductions

by Matthew Person on October 19, 2016

Year-end Tax Planning: Section 179 Deductions

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 2016 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. The “Protecting Americans from Tax Hikes Act of 2015” (PATH Act) was passed by both the House and Senate and signed into law in December 2015. This bill expanded the Section 179 deduction limit to $500,000. 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.

Purchases that generally qualify for 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 (Section 179 Vehicle Deductions)
  • Computers
  • Computer “Off-the-Shelf” Software
  • Office Furniture
  • Office Equipment
  • Property attached to your building that is not a structural component of the building (i.e.: a printing press, large manufacturing tools and 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).

In addition to an increased limit for Section 179, 50% Bonus Depreciation will be extended through 2019. Businesses of all sizes will be able to depreciate 50 percent of the cost of equipment acquired and put in service during 2015, 2016 and 2017. Then bonus depreciation will phase down to 40 percent in 2018 and 30 percent in 2019.

We can help you take advantage of Section 179 and Bonus Depreciation to lower your overall tax bill. Contact us today!

Contact Person Huff CPA Group

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