Benefits of Sec. 179 Bonus Depreciation

Section 179 of the Internal Revenue Code allows businesses to write off the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. This tax incentive was created to encourage businesses to invest in themselves by purchasing new equipment and other property.

Under the current tax laws, businesses can write off up to $1 million of qualifying equipment purchases, with a $2.5 million spending cap. This means that if a business spends more than $2.5 million on equipment, the write off will begin to phase out dollar-for-dollar. However, it's important to note that the spending cap is subject to change each year, so it's important to check with a tax professional to determine the exact amount that can be written off.

One of the biggest benefits of the Section 179 write off is that it allows businesses to deduct the full purchase price of qualifying equipment from their gross income in the year it was purchased. This can provide a significant tax savings for businesses, particularly for those that are in the early stages of growth.

Qualifying equipment for the Section 179 write off includes a wide range of items, such as machinery, computers, office furniture, and vehicles. However, it's important to note that not all equipment is eligible for the write off. For example, certain items such as land and buildings are not eligible.

In order to take advantage of the Section 179 write off, businesses must complete IRS Form 4562 and attach it to their tax return. It's also important to keep detailed records of all equipment purchases, as the IRS may request this information during an audit.

While the Section 179 write off can provide significant tax savings for businesses, it's important to carefully consider the long-term implications of any equipment purchases. In some cases, it may be more beneficial to finance equipment purchases rather than paying for them upfront, as this can help to spread out the cost over time.

Overall, the Section 179 write off is a valuable tax incentive for businesses that are looking to invest in new equipment and property. By taking advantage of this write off, businesses can save money on their taxes and invest in their future growth.