Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That 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. Read more at Section179.org.
Chris Fletcher's article, How much money can Section 179 save contractors on 2020 equipment purchases? from EquipmentWorld.com provides these essential details...
What equipment qualifies?
Almost all tangible business equipment qualifies: production machines and related equipment; office machines and furniture; computers and common software; safety equipment; most signage; business vehicles in excess of 6,000 pounds gross vehicle weight (including heavy equipment); and more.
Note: If you needed to buy equipment to modify your workspace for COVID-19, such as plexiglass dividers, air filtration systems, sanitizing stations, new servers for work-at-home people, etc., it’s very likely they are Section 179 eligible, which is great news. As always, ask your accountant for the final word.
How much money can Section 179 save me in 2020?
It depends on the cost of the equipment you purchase, and ultimately, your tax rate. But let’s say you buy $50,000 worth of equipment. With Section 179, you can deduct the entire $50,000 from your taxable income. At a 35 percent tax rate, that would result in a net tax savings of $17,500. Read more at EquipmentWorld.com.
If you're currently considering an equipment purchase, you may want to buy before the end of 2020 so you can take advantage of the deduction on this year's tax return.
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