Updated Section 179 Tax Deductions for Businesses
Are you curious as to what’s the latest for the 2019 tax year and 2020 for small businesses? Interested in how Section 179 can help before the end of the year? Below is an overall, general view of the Section 179 Deduction for 2019.
2019 Deduction Limit = $1,000,000 (one million dollars) — This deduction is good on new and used equipment, as well as off-the-shelf software. To take the deduction for tax year 2019, the equipment must be financed or purchased and put into service between January 1, 2019, and the end of the day on December 31, 2019.
2019 Spending Cap on equipment purchases = $2,500,000 — This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced on a dollar for dollar basis. This spending cap makes Section 179 a true “small business tax incentive” (because larger businesses that spend more than $3.5 million on equipment won’t get the deduction.)
Bonus Depreciation: 100% for 2019 — Bonus Depreciation is generally taken after the Section 179 Spending Cap is reached. The Bonus Depreciation is available for both new and used equipment.
Here’s How Section 179 works
In years past, when your business bought qualifying equipment, it typically wrote it off a little at a time through depreciation. In other words, if your company spends $50,000 on a machine, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example).
Now, while it’s true that this is better than no write-off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it.
And that’s exactly what Section 179 does — it allows your business to write off the entire purchase price of qualifying equipment for the current tax year.
This has made a big difference for many companies (and the economy in general.) Businesses have used Section 179 to purchase needed equipment right now, instead of waiting. For most small businesses, the entire cost of qualifying equipment can be written-off on the 2019 tax return (up to $1,000,000).
Limits of Section 179
Yes, Section 179 does come with limits — there are caps to the total amount written off ($1,000,000 for 2019), and limits to the total amount of the equipment purchased ($2,500,000 in 2019). The deduction begins to phase out on a dollar-for-dollar basis after $2,500,000 is spent by a given business (thus, the entire deduction goes away once $3,500,000 in purchases is reached), so this makes it a true small and medium-sized business deduction.
For more details on limits and qualifying equipment, as well as Section 179 Qualified Financing, please read the entire Section 179 website carefully.