2019 is the year to invest in your business. The government has adjusted the bonus depreciation amount on equipment purchases under Section 179 to 100%. In plain terms, your business can write off 100% of business equipment purchases, up to a $1,000,000 deduction. This is an opportunity for smaller companies to invest in their future, upgrade necessary equipment, and improve the efficiency of their business with minimal financial ramifications.
What is classified as “equipment”?
All items must be material and used by your business at least 50% of the time. All equipment must be put into operation by your business in 2019. Common products deducted under Section 179 include:
- Office Furniture
- Company Vehicles
- Computers and “off the shelf” software
- Office Equipment
These items can be both new and used. If the equipment is “new” to your business, products purchased in preowned condition qualify for the 100% bonus deprecation. This means that you can deduct the FULL PURCHASE PRICE of all qualified equipment, both new and preowned, from your 2019 gross income.
What if the equipment is leased or financed?
You are still able to write off 100% of your 2019 equipment purchase regardless of how it was bought. Items that are financed or leased are included under Section 179. Your company does not have to buy the equipment outright to qualify for the bonus depreciation.
All limitations to Section 179 are monetary. The total amount that can be written off is $1,000,000. The total amount of equipment purchased cannot exceed $2,500,000. After $2,500,000 is spent, the deduction begins to phase out dollar-by-dollar. The entire deduction is lost at $3,500,000 or more in purchases.
How long will Section 179 include 100% bonus depreciation?
Purchase any business equipment as soon as possible. The conditions of Section 179 change from year to year. Previously, used equipment was not considered eligible for deductions. Furthermore, the depreciation rate is adjusted year to year. There is a strong possibility in 2020, that the bonus deprecation amount will decrease from 100%. Take advantage of this opportunity now. Remember, the equipment must be both purchased and used in 2019. With only 6 months left in the year, consider beginning projects that may require long term execution, such as office furniture remodels and upgrades.
This article has been written as an informative overview of Section 179 of the IRS tax code. Please consult with your accountant for any specific questions regarding your business’ equipment purchases, deductions, and tax qualifications. Transfer Enterprises does not guarantee any deductions. The limits or qualifications of Section 179 can change at any time. For additional information, please visit https://www.section179.org/.