Section 179 Tax Deduction
Congress made the Section 179 tax deduction permanent at the $500,000 level in 2016. Because of this, companies are free to purchase new and used equipment and deduct the full purchase price in the same year (not needing to only deduct the amount that has been paid off thus far). This deduction applies to computer hardware/software, vehicles used for business, office furniture, office equipment, and industrial equipment.
This deduction has become more beneficial for businesses in 2016. The Section 179 deduction limit increased from $25,000 in 2015 to $500,000 in 2016. There is a limit: once a business makes over $2,000,000 of capital purchases, the Section 179 deduction will phase out dollar for dollar up to $2.5 million where the deduction amounts to zero.
However, another Section 179 benefit is bonus depreciation. There is a 50% bonus depreciation for equipment acquired if the purchase exceeds $500,000. This bonus depreciation will phase out to 40% in 2018 then to 30% in 2019.
A BENEFIT TO BUYING OVER RENTING
While renting is convenient for the inherent flexibility, buying may pay off financially. So, make sure to do the math and find out what will be most beneficial; it may surprise you. With the month of June in the books, businesses on a calendar year-end have a half year recorded. It may be time to revisit the budget, check progress, and then make an investment decision. To be able to use the 2016 Section 179 tax deduction, all purchases need to be financed and in place by midnight on December 31, 2016. As financing for some equipment can a few months, make sure to place your orders soon.
To read more about Section 179, check out the FAQ's page here.
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