Demystifying Section 179

Short version: the Section 179 Tax Deduction of the IRS Tax Code allows you to deduct the full purchase price of purchased, leased or financed equipment. That’s a major benefit to your business. It is especially useful for small businesses, helping to maximize purchasing power.

What is Section 179?

The Section 179 Tax Deduction of the IRS Tax Code allows you to deduct the full purchase price of purchased or financed equipment from your gross income. There are also many types of software that qualify as “equipment.” For most small businesses, the entire cost of qualifying equipment can be written-off on the 2020 tax return (up to $1,040,000).

What qualifies for Section 179?

Most tangible goods used by American businesses, including “off-the-shelf” software and business-use vehicles (restrictions apply) qualify for the Section 179 Deduction. You are required to purchase AND put that equipment to use within the tax year (January 1, 2020 – December 31, 2020).

What’s my deduction limit?

Simply put, you can deduct the full purchase price of any qualifying equipment or machinery that you finance, lease or buy within a tax year. When you write off the entire purchase of a piece of equipment, it’s entirely possible to lease or purchase more equipment sooner. If you need it for your business, the government wants you to have it.

The spending limit for Section 179 varies from year to year. For example, the deduction limit for 2017 was $500,000. The deduction limit for this year is $1,040,000, a substantial difference. For 2020, $1,040,000 of assets can be expensed; that amount phases out dollar for dollar when $2,590,000 of qualified assets are placed in service.

Final Thoughts

We encourage you to consider Section 179 this year. It is simple to use and only requires the appropriate IRS form. If you need medical equipment, you know Medical Device Depot is the affordable solution. Section 179 makes it even more affordable.