Section 179 – What is it and Why You Should Care

By August 27, 2020Uncategorized

If there were an opportunity to lessen your company’s payments to the IRS, it would make sense that you would be interested in doing so, right? Introducing, U.S. Tax Code “26 U.S. Code 179.” The truth is,  while there are many tax laws that will assist businesses in reducing their tax liability, this tax code, also known as “section 179”, is often missed by companies and their CFOs. While this section does not get the attention it deserves, it is definitely one that you’ll want to pay attention to.

So, What is it?

The purpose of section 179 is for qualifying businesses is to deduct the full purchase price of certain depreciable assets purchased during that tax year. Depreciation will generally take place through portioned deductions over the course of several years, however with this tax code, you and your company may be able to deduct the depreciation expenses, up to $1,000,000, in full within just a single year beginning in 2020. Section 179 expensing is an extremely valuable resource to businesses who qualify and can potentially save you a significant amount in tax liability once April rolls around!

Determine your Company’s Eligibility:

Section 179 has evolved through the years, so it is crucial to understand what property qualifies in 2020. To be eligible for the Section 179 Deduction this year, the asset(s) must be used for business purposes for more than 50% of the time, and can be new or used, so long as it is new to you. Additionally, the asset(s) are eligible regardless of whether it was purchased outright, leased, or financed. The following assets generally qualify for the Section 179 Deduction:

  • Equipment purchased for business use
  • Tangible personal property used in business
  • Business vehicles with a gross weight of 6,000 lbs
  • Computers
  • Office furniture & equipment
  • Property attached to your building (printing press, manufacturing tools & equipment)
  • Certain improvements in non-residential buildings (fire alarms, security systems)

Many people confuse the purpose of Section 179, so it is crucial to know that the law does not adjust the set amount that you can deduct for a depreciable asset. What the law does do, is allow you to deduct that entire amount all at one time rather than dispuring the deduction through the lifespan of the property. This is important, because large business purchases will likely put a dent in the budget. Section 179 is an opportunity to offset the costs of the initial expenditure in the same year. This helps many businesses make large purchases to stay competitive while giving them a larger tax break that particular year to help manage the budget.

Contact Blue Street Capital to Discuss Your Options

Many businesses won’t flourish because they are running on outdated and ineffective hardware. Without knowing how to fix or upgrade these purchases, turning a profit can become difficult. At Blue Street Capital, we offer flexible and beneficial technology financing solutions for businesses, so that you can stay up-to-date and improve efficiency without worrying a major expense all at once. You can also take advantage of Section 179 expenses to deduct the technology expenses the first year of purchase.

To learn more about how Blue Street Capital may be able to help your company, don’t hesitate to contact us today.