Have you had a good year? Considering buying some much-needed hardware or software before the end of 2018? The Section 179 tax deduction may be the perfect gift for you.
This tax deduction is available to small and medium businesses (SMBs) that purchased qualifying equipment during the tax year. 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. For example, if your business purchased $100,000 in new computers, and you’re in the 35% tax bracket, you can write off $35,000!
Keep in mind that this is not included in your standard tax preparation. You will need to elect to claim that property and fill out an additional tax form. To elect to take the Section 179 Deduction, simply fill out Part 1 of IRS form 4562 and attach it to your tax return.
The following items are considered qualifying by IRS.gov.
- 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.
- 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)
- Certain improvements to existing non-residential buildings: fire suppression, alarms and security systems, HVAC, and roofing.
Before you jump for joy and order all those new goodies, though, we urge you to confirm with your accounting team if you qualify.
Here is more information on the deduction.