- November 28, 2017
- Posted by: Nicholas Fitch
- Category: Tax Advantages of Leasing
IRS Section 179 deduction limits for 2017 are set at $510,000- with 50% bonus depreciation applying on the remaining balance up to $2,030,000. Section 179 of the IRS tax code allows small businesses and freelance professionals to immediately expense up to 100% of newly acquired equipment in the year it was placed in service, helping to reduce tax liability for the tax year in question. Deductions for 2017 are up from 2016, which saw limits at $500,000/$2,010,000. Section 179 was positively affected by the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), which permanently increased the Section 179 deduction limit to $500,000, with $10,000 adjustments for inflation each year starting in 2017. Section 179 for 2018 was raised again to $1,000,000 with 100% bonus depreciation up to $2,500,000.
What Is Qualified Property Under Section 179?
Generally speaking, almost every piece of equipment used for business purposes can be deducted under Section 179, including:
- Machinery and equipment
- Tangible personal property used for business
- Business vehicles with a gross vehicle weight over 6,000 lbs
- Business vehicles under 6,000 lbs limited to $11,160
- Digital cinema cameras, photography equipment and accessories
- Medical Equipment
- Office Furniture
- Off-the-Shelf Computer Software
- Office Equipment (printers, phone systems, computers)
- Property contained in or attached to a building (other than structural components), such as refrigerators, grocery store counters, office equipment, printing presses, testing equipment, and signs.
- Partial Business Use (equipment that is purchased for mixed business use and personal use). Deductions will be based on the percentage of time you use the equipment for business purposes. If you purchase a high-end camera and use it 80% of the time for business, and 20% of the time for personal use, you can deduct 80% of the cost under Section 179.
Can you take Section 179 on leased equipment?
Yes, equipment financed under a capital lease or on an equipment finance agreement still qualifies for the Section 179 deduction. In fact, this is a popular strategy among business owners as they immediately get to write-off up to 100% of their equipment purchase, but pay for it over time as it generates revenue. A capital lease is one with a $1 end-option or 10% PUT/balloon due at the end of the term. Financing equipment at the end of the year and immediately depreciating it under IRS Section 179 can mean BIG tax savings for companies and individuals. Most equipment leasing companies are well versed on Section 179 requirements and can structure your financing to be in compliance. In order for equipment to qualify for 2017 Section 179 deductions, you must purchase or sign an equipment lease or loan before December 31, 2017 at 11:59PM.
What is Section 179 bonus depreciation?
While both new and used equipment qualifies for write-offs under Section 179, only new equipment qualifies for bonus depreciation. After the Section 179 deduction is used up to the current year’s limit ($510,000 for 2017), bonus depreciation can be utilized on the remaining balance. Bonus depreciation expired at the end of 2014, but was reinstated as follows for 2015-2019:
- 50% for 2015 – 2017
- 100% in 2018
- 100% for 2019
Section 179 Examples
Section 179 deductions may seem a little complicated, but here are some examples that show how to write-off qualified equipment:
The example above shows a larger equipment purchase that qualifies for bonus depreciation. The example below shows a smaller equipment purchase that qualifies for 100% depreciation in the first year:
Section 179 Tax Deduction Calculator
WB FINANCIAL provides equipment financing quotes and proposals that are complete with Section 179 deduction information. The Section 179 deduction calculator will show you just how affordable financing a piece of new/used equipment for your business can be. With affordable monthly payments and little-to-no money in advance, financing equipment and taking advantage of IRS Section 179 can add to your company’s bottom line for years to come. E-mail us at firstname.lastname@example.org to arrange a Section 179 qualified equipment lease/loan, or get a free quote and Section 179 deduction calculation here: Section 179 Deduction Calculator.