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Using the Section 179 Tax Deduction to Benefit You

section_179_deadline_approaching Hurry! Section 179 Deadline Is December 31st!


As a business owner or supervisor, you've spent plenty of time trying to find ways to help the company maximize its resources and be more efficient with costs. As we come up to tax season, you may be looking for ways to lessen your tax burden and put more cash back into the business. For many, Section 179 of the IRS tax code is a way to do both.

Although Section 179 has been around for quite a few years and has undergone changes during that time, that main gist of Section 179 stays the same: It allows qualifying businesses to deduct the full purchase price of new and used equipment for the year it was purchased, rather than using the standard depreciation method. This change to the tax code was intended to help businesses invest more heavily into purchasing and leasing equipment and other qualifying items to improve the business. 

How Section 179 is Different from Standard Depreciation? 

There is a good size list of items that qualify for Section 179 – everything from computer equipment to some construction improvements – but for our purposes, let's look at material handling equipment. Almost all material handling equipment qualifies for Section 179 and it can be used equipment, as long as it is "new" to you. Outright purchasing qualifies, as well as financing. So, if you've had your eye on a piece of equipment – from a forklift, aerial lift, floor cleaning equipment or even a utility vehicle – you should probably look at Section 179 to see if it presents an advantage to you. If it makes more sense to take Section 179 and recoup the full deduction in the year it was purchased, then Section 179 may be for you. In contrast, deducting the price of a piece of equipment by, for example, 10% over 10 years in standard depreciation models leaves many with a used piece of equipment that isn't worth the book value anymore by the time it's been fully depreciated.

What are the Limits of Section 179?

The maximum amount that can be deducted by one business entity in one year is $1,000,000 and the maximum amount that can be spent by one business entity in one year on eligible equipment is $2,500,000. Once a company has spent more than $2,500,000 on equipment in a calendar year, the Section 179 deduction starts decreasing dollar by dollar until a company spends $3,500,000 on equipment – at which time that company is no longer eligible to use the deduction.

Deadlines that must be met in order to qualify for Section 179 include that the piece of purchased or financed equipment must be in use in the company 50% of the time by Dec. 31, 2019. Companies need to take into account training that may need to be accomplished by employees for certain pieces of equipment, weather delays and holiday time off as they calculate the necessary time needed to get a piece of equipment up and running before the end of the year.

Customers that want to take advantage of the Section 179 tax deduction program should consult their business accountant to see if they qualify. For more information on purchasing or financing a new or used piece of equipment, contact the professionals at Madland Toyota-Lift to find out more.
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Thursday, 25 April 2024