Section 179 is a tax deduction that brings significant tax savings to small- and medium-sized businesses. It does not increase the total amount the small business owners can deduct, but it allows them to take their entire depreciation deduction in one year, rather than taking it a little at a time over the term of an asset’s useful life….which can be up to 39 years in some cases. This is called “first-year expensing” or “Section 179” expensing.
Annual Deduction Limit:
As of 2021, Section 179 allows Corporate America to write off up to $1,050,000 of qualified equipment purchases, up from $1,040,000 in 2020. You must reduce your Section 179 deduction by one dollar for every dollar your annual purchases exceed the applicable limit which is $2,620,000
- New and used equipment (but must be new to you, whether purchased, leased, or financed)
- Tangible personal property used in business
- Office furniture and office equipment
- Business vehicles with a gross vehicle weight in excess of 6,000 lbs
- Property attached to your building that is not a structural component (printing press, large manufacturing tools)
- Partial business use (equipment purchased for business and personal use: generally, the deduction will be based on the % of time it’s used for business)
Business Profit Limitation:
As mentioned earlier, the maximum write-off is $1,050,000 for the 2021 year. Section 179 is made for small- and medium-sized businesses that spend less than $3,670,000 in purchases. You cannot use Section 179 to deduct more than your net taxable business income for the year. If you have a net loss for the year, you cannot take the Section 179 deduction for that year. If your net taxable income is less than the cost of the property you wish to deduct under Section 179, your deduction for the year is limited to the amount of your income. Any amount you cannot deduct in the current year, you can carry forward and deduct the next year (or any other year in the future).
Consult with your CPA or Tax Advisor to see how Section 179 can help your company acquire the equipment needed and save pre-tax dollars.
Interested in purchasing Photopolymer Processing Equipment? Contact us for a quote.
Information updated 11/8/21