Many tax laws help businesses reduce their tax liability. However, not every CFO fully understands all available tax breaks, and companies often end up paying more than necessary to the IRS. One section of the U.S. Tax Code you should definitely understand is 26 U.S. Code § 179 – commonly called “Section 179.”
Section 179 allows qualifying businesses to expense certain depreciable assets. While depreciation may happen over several years, this law allows you to deduct the depreciation expenses in full in a single year instead of deducting a portion each year for the lifespan of the property. In addition, the Tax Cuts and Jobs Act (TCJA) passed in 2017 substantially increased limits for Section 179 business expensing for 2018 and 2019. Every business should know about available Section 179 expensing, as it can save you a significant amount in tax liability come April 15th!
Property Expenses You Can Deduct Under Section 179
Not EVERY item of property can be deducted under Section 179, though many types of property qualify. Some criteria for eligibility include:
- It must be tangible property
- It cannot be land, intellectual property, or inventory
- The property must be purchased (cannot be a gift or inherited)
- You must use the property for business purposes 51 percent of the time or more if you also use it for personal reasons (i.e., a printer you use for both the company and personal printing)
If the property purchased meets the above criteria, you can deduct first-year purchases of new or used items. This includes technology for your business, such as computer hardware and most types of software.
How Section 179 Can Benefit You This Year
Many people mistakenly believe that Section 179 will increase your business property deduction – it doesn’t. There is a set amount you can deduct for a depreciable asset, and Section 179 doesn’t change that. What the law does, however, is allow you to deduct the entire amount all at once instead of spreading the deduction over the life of the purchased property.
Why is this important? Any business owner knows that major purchases – such as new computer hardware for the entire office – can put a serious dent in the budget. By allowing you to deduct the full amount for that hardware the same year you purchased it, Section 179 expenses can offset the costs of the initial expenditure. 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 Business Technology Needs Today
Too many companies have outdated or ineffective hardware and software because they don’t know how to fit upgrades or new purchases in their budget. 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.