Consider The Savings: Tax Benefit for 2015 is Expiring…

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Oct 12, 15 • Front Page, News, TipsNo Comments

Consider The Savings: Tax Benefit for 2015 is Expiring…

What are you waiting for? Now is the time to purchase equipment for your business! The accelerated deprecation deduction allowance permitted under IRS Section 179 is $25,000 for 2015.  This means up to $25,000 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, 2015.

Savings

Ultimately, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of the qualifying equipment and/or software purchased or financed during the given tax year.  What does that mean? It means you can deduct the FULL PURCHASE PRICE from your gross income.  For example, when a business buys a certain piece of equipment, it typically gets to write them off a little at a time through depreciation [i.e.$10,000 over a five-year period].  While it’s better than no write-off at all, most business owners would prefer to write off the entire equipment purchase for the year they actually buy it.  The whole reason behind Section 179 is to motivate the American economy, especially small businesses.  For many small businesses, the entire cost [up to $25,000] can be written-off on the 2015 tax return.

Limits of Section 179

Section 179 does come with limits – there are caps to the total amount written off ($25,000 for 2015), and limits to the total amount of the equipment purchased ($200,000 in 2015). The deduction begins to phase out dollar-for-dollar after $200,000 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 $200,000 in new or used business equipment during tax year 2015 should qualify for the Section 179 Deduction.

The deduction begins to phase out if more than $200,000 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.

Woman with coins in jar

Section 179 vs. Bonus Depreciation

Bonus Depreciation is offered some years.  As of now, it is not being offered.

Although it is not available at this time [2015], here are some of the differences.  The most important difference is both new and used equipment qualify for the Section 179 Deduction (as long as the used equipment is “new to you”), while Bonus Depreciation covers new equipment only.  Bonus Depreciation is useful to very large businesses spending more than the Section 179 Spending Cap (currently $200,000) on new capital equipment.  Even businesses with a net loss are qualified to deduct some of the costs.

Section 179 “More Than 50% Business Use” Requirement

The equipment and/or software must be used for businesses purposes more than 50% of the time to qualify.  How do you know if it meets the requirements? Multiply the cost of the equipment and/or software by the percentage of business-use to determine the monetary amount eligible for Section 179.

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