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REDUCE YOUR TAXES: Tax Benefit for 2016, Section 179 Deduction
2016 is flying by and before you know it 2016 will come to an end. However, for many companies this is one of the busiest times of the year. Production is in full demand! Now is the time to purchase new and/or additional equipment for your business! Not only can it benefit production time but also provides BIG SAVINGS! The “Protecting Americans from Tax Hikes Act of 2015” (PATH Act) expanded the Section 179 deduction limit to $500,000, and made it permanent. This means up to $500,000 in qualifying new and used equipment, as well as off-the-shelf software, may be expensed this year if it is placed into service by the end of the day, December 31, 2016.
The PATH Act also reinstated the 50% Bonus Depreciation, and extended it through 2019. Businesses of all sizes will be able to depreciate 50 percent of the cost of equipment acquired and put in service during 2016 and 2017; even after the Section 179 deduction is taken, and all in the first year!
LIMITS OF SECTIONS 179
Section 179 does come with limits – there are caps to the total amount written off ($500,000 for 2016), and limits to the total amount of the equipment purchased ($2,000,000 in 2016). The deduction begins to phase out dollar-for-dollar after $2,000,000 is spent by a given business, so this makes it a true small and medium-sized business deduction.
WHO QUALIFIES FOR SECTION 179
All businesses that purchase, finance, and/or lease less than $2,000,000 in new or used business equipment during tax year 2016 should qualify for the Section 179 Deduction.
Most tangible goods including “off-the-shelf” software qualify for the Section 179 Deduction. To qualify for the Section 179 Deduction, the equipment and/or software purchased or financed must be placed into service between January 1, 2016 and December 31, 2016.
The deduction begins to phase out if more than $2,000,000 of equipment is purchased – in fact, the deduction decreases on a dollar for dollar scale after that, making Section 179 a deduction specifically for small and medium-sized businesses.