SECTION 179 DEDUCTIONS

Section 179 Deductions

As you can see from the chart below, the savings can be huge. This has made a big difference for many companies (and the economy in general.) Businesses have used Section 179 to purchase needed equipment immediately, instead of waiting. For most small businesses, the entire cost of qualifying equipment can be written-off on the 2019 tax return.

All businesses that purchase, finance, and/or lease new or used business equipment during tax year 2019 should qualify for the Section 179 Deduction (assuming they spend less than $3,500,000).

Most tangible goods used by businesses qualify for the Section 179 Deduction. And lastly, to qualify for the Section 179 Deduction, the equipment and/or software purchased or financed must be placed into service between January 1, 2019 and December 31, 2019.

For further information about Section 179, you can check out the IRS’s website or consult a qualified tax professional.

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What is Section 179 Deduction and How Does it work? Section 179 of the IRS tax code provides a tax advantage to business owners who purchase or lease equipment or software. It allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. This means that if you buy or lease a piece of qualifying equipment, you can deduct the full purchase price from your gross income. It’s an incentive created by the U.S. Government to encourage businesses to buy equipment and invest in themselves.

Prior to Section 179, when your business bought qualifying equipment, it was required to write it off over several years through depreciation. In other words, if your company spends $100,000 on a machine this year, then for tax purposes, it can only write-off or depreciate a portion of the total cost in this year rather than the full amount. After Section 179 became effective, the business is allowed to depreciate the full amount of the purchase in the same year thereby significantly reducing your taxable income further allowing you to invest in growing your business. See chart below for sample savings.

Cost of EquipmentSection 179 DeductionCash Savings on Your Purchase Assuming a Tax Bracket of 35%Lowed Cost of Equipment After Tax Savings
$10,000$10,000$3,500$6500
$50,000$50,000$17,500$32,500
$100,000$100,000$35,000$65,000
$250,000$250,000$87,500$162,500
$500,000$500,000$175,000$325,000
$1,000,000$1,000,000$350,000$650,000