Section 179 is a very attractive tax deduction for both small and medium businesses looking to make new equipment purchases this year.
The Section 179 deduction is a tax code that the Internal Revenue Society (IRS) created to help small and midsize business owners immediately expense and write-off certain business equipment, such as equipment used by plumbing and trenchless companies alike. This is done in the year its put into service. Section 179 is a really great opportunity for business owners because it eliminates the wait for reimbursement and provides a significant tax refund in the current year versus paying amortized payments over a longer period of time.
The 2020 Section 179 deduction states that businesses can deduct the full amount of qualified equipment purchases up to $1,040,000 with a total purchase limit of $2,590,000. Best of all, Section 179 applies to new, used, leased, and financed equipment.
For financed equipment, business owners can deduct the entire amount of the equipment without paying the full amount in the current year. According to Section179.org, “The amount you save in taxes can actually exceed the payments, making this a very bottom-line friendly deduction (in many cases, the tax savings from the deduction will make your bank account larger than if you never financed the equipment in the first place.)”
Many successful businesses choose to take advantage of this tax incentive to help lower their operating costs, which is a common goal. This tax incentive is easy to use, and gives businesses an opportunity to invest in themselves by adding capital equipment that they use to improve their operations and further increase revenue. Sounds too good to be true, but it is true and you should really consider new equipment purchases before year-end.
Are you considering whether or not to purchase or lease equipment in the current tax year? This Section 179 Deduction Calculator for 2020 may very well help in your decision.
In short, taking advantage of the Section 179 Deduction will ultimately help your business add new equipment or even vehicles and software. The best part is, you get to keep more of your tax dollars.