Section 179 is back, and it’s bigger than ever. If you didn’t take advantage of this business-boosting tax break last year, don’t worry – there’s still time to benefit before 2018 ends.
Instead of gradually depreciating large purchases over several years, Section 179 allows businesses to deduct the full price of qualifying equipment in the year it’s purchased. This applies whether the equipment is purchased outright, financed or leased, and whether you get it new or used.
The goal is for businesses to stay competitive in a rapidly-evolving market by upgrading lagging technology and equipment that’s holding them back from optimal performance.
If you have IT upgrades in your plans, the tax benefits may really help you get the productivity you need, sooner than you might have expected.
What counts as a qualifying purchase?
- Equipment used for business purposes more than 50% of the time
- Computers, workstations, laptops, tablets and smartphones
- “Off-the-shelf” software without substantial modification
- Office machinery and equipment like servers, printers, routers and network security appliances
- Office furniture
- Commercial use vehicles weighing more than 6,000 pounds
- Nonresidential property improvements like fire suppression, alarms, security systems, HVAC and roofing
How do I use Section 179?
Your equipment must be put into use by midnight on December 31, 2018. At tax time, claim your deduction using Form 4562. Even if you have a net loss, you may be qualified to deduct some of the cost and carry forward your loss. To confirm your eligibility, consult with your accountant or another tax professional.
How much can I deduct?
The maximum total amount you can write off is $1 million. However, for the remainder of 2018, you can claim the full deduction until you’ve reached $2.5 million in purchases. After that, the deduction decreases dollar for dollar up to $3.5 million.
When should I replace my equipment?
The lifecycle of your technology depends on usage and maintenance, but a good guideline is three to five years for IT equipment, and six to ten years for company vehicles.
Outdated technology slows down innovation, frustrates your employees and customers, and costs you thousands of dollars in unplanned downtime. Or, you could leverage Section 179 to get new tech while mitigating the upfront cost.
Of course, tax breaks are only one way to support your business. Looking for more ways to grow? Schedule a free discussion session with our experts today!