What is Section 179?
The Section 179 Tax Deduction is a special federal IRS law that allows businesses to deduct all or part of the purchase price of certain qualifying business equipment. Section 179 was designed with businesses in mind, which is why almost all types of business equipment that your company buys or finances qualifies for the section 179 deduction.
Why do you need to know this? It is a great opportunity to upgrade your old software and computer hardware!
Section 179 can save you a lot of money, but it can also be confusing. Section 179 provides some very valuable tax advantages for most types of equipment and software placed into service this year. If you want to take advantage of this, you should get started now because it expires when the ball drops on December 31! Drop us a note and we’ll help you get started.
We’ve also put together a free buyers guide to help navigate the IT purchasing labyrinth. You can download it here: Hardware Purchasing Guide
So let’s talk about the details:
What qualifies for the Section 179 deduction?
- Equipment (machines, etc.) purchased for business use
- Tangible personal property used in business
- Business vehicles with a gross vehicle weight in excess of 6,000 lbs
- Computers
- Computer “off the shelf” software
- Office furniture
- Office equipment
- Property attached to your building that is not a structural component of the building (e.g.: a printing press, large manufacturing tools, and equipment)
- Partial business use (i.e., equipment that is purchased for business and personal use)
What is non-qualifying?
Real property (i.e., land, buildings, permanent structures, components of permanent structures, paved parking areas, and fences)- Air conditioning
- Heating equipment
- Property used outside the United States
- Property used to furnish lodging
- Property acquired by gift or inheritance
- Property purchased from related parties
- Any property not considered to be personal property
- Used equipment (that is new to you) qualifies for Section 179, but NOT for Bonus Depreciation
- Sheep (just making sure you’re still reading.)
What is the bonus depreciation?
The passage of the Tax Cuts and Jobs Act (TCJA) in 2017 significantly changed the rules for bonus depreciation by allowing businesses to immediately write off 100% of the cost of eligible property acquired and placed in service after September 2017, and before January 2023.
The 100% write-off of eligible property expired in December 2022. Unless the law changes, the bonus percentage will decrease by 20 points each year for property placed in service after December 31, 2022, and before January 1, 2027. The phase-out schedule is as follows:
- 2022: 100%
- 2023: 80%
- 2024: 60%
- 2025: 40%
- 2026: 20%
- 2027: 0%
What is the deduction limit?
The Section 179 deduction for 2024 is $1,220,000, which is an increase of $60,000 from 2023’s limit. This means U.S. companies can deduct the full purchase price of ALL qualified equipment purchases, up to the limit of $1,220,000.
The deduction can include both new and used equipment acquired and put into service between January 1, 2024 and December 31, 2024.
What is the deadline for ordering?
Section 179 specifies that all orders must be paid for and received by December 31 at midnight. So you need to have your orders in no later than December 15 to ensure delivery.
Have questions?
Call us at 541-779-4777, or email Chris at chrisd@tekmanagement.com for general questions and to get started with a quote. If you have technical tax-related questions, please talk to your tax professional. Additional information can be found at helpful sites like Section179.org (which has a tax calculator you can use for estimates).