Here at netsapiens, we are all about helping our partners grow their businesses and be successful. While most of our efforts concentrate on providing service providers and enterprises with a comprehensive suite of unified communications (UC) services and feature-sets, we also think it is important to pass along helpful information when we can. Have you heard of the Section 179 tax deduction for businesses? If not, read on – we think you will like what you see!
How Section 179 Works
Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying new and used equipment, vehicles (restriction apply) and software purchased or financed during that tax year. This is part of the federal government’s stimulus bills and it especially benefits small businesses. Here are the limits:
- 2018 Deduction Limit = $1,000,000
- 2018 Spending Cap on Equipment = $2,030,000
Basically, the Section 179 deduction is good for equipment and off-the-shelf software bought and put into service between January 1, 2018 and December 31, 2018. The regulations allow a business to have spent up to $2,030,000 before the Section 179 deduction is reduced on a dollar for dollar basis. This favors small-to-medium sized businesses since larger enterprises that spend over the limit will not get the deduction.
Additionally, for 2018, businesses can take advantage of a 50% bonus depreciation benefit after reaching the spending cap. This provides a nice incentive to the larger enterprises who may not qualify for the Section 179 deduction. However, the bonus depreciation is only for brand new equipment; this means that previously-used equipment, which you may have bought this year, will not qualify.
A Few Conditions
It is important to note that, to qualify for the deduction, you must have used your equipment, software and vehicles for business purposes more than 50% of the time. Multiply the cost of these items by the percentage of business-use to arrive at the dollar amount eligible for Section 179.
Another piece of good news is that the Section 179 deduction works for leased equipment. Many businesses prefer leasing equipment and software with the allowable deduction as it assists with both cash flow and profits.
What is the bottom line? Act now! Section 179 can change from year to year without notice. Your business is unique, and we recommend you discuss Section 179 with your Certified Public Accountant or other competent tax professional as soon as possible.
Note: Information provided in this document is for illustrative purposes only and accuracy is not guaranteed. NetSapiens and its owners, agents, employees, affiliates, suppliers, and partners are not tax advisors, and this document is not intended to offer any tax advice. Please consult with qualified tax professionals concerning your specific situation.