Section 179 at a glance for Tax Year 2014
2014 Deduction Limit = $25,000
This is good on new and used equipment, as well as off-the-shelf software.
2014 Limit on equipment purchases = $200,000
This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced.
The above is an overall, “simplified” view of the Section 179 Deduction for 2014.
What is the Section 179 Deduction?
Most people think the Section 179 deduction is some mysterious or complicated tax code. It really isn’t, as you will see below.
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.
Several years ago, Section 179 was often referred to as the “SUV Tax Loophole” or the “Hummer Deduction” because many businesses have used this tax code to write-off the purchase of qualifying vehicles at the time (like SUV’s and Hummers). That particular benefit of Section 179 has been severely reduced in recent years.
Today, Section 179 is one of the few incentives included in any of the recent Stimulus Bills that actually helps small businesses. Although large businesses also benefit from Section 179 or Bonus Depreciation, the original target of this legislation was much needed tax relief for small businesses – and millions of small businesses are actually taking action and getting real benefits.
Essentially, Section 179 works like this:
When your business buys certain items of equipment, it typically gets to write them 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.
In fact, if a business could write off the entire amount, they might add more equipment this year instead of waiting over the next few years. That’s the whole purpose behind Section 179 – to motivate the American economy (and your business) to move in a positive direction. For most small businesses, the entire cost can be written-off on the 2014 tax return (up to $25,000).
Limits of Section 179
Section 179 does come with limits – there are caps to the total amount written off ($25,000 for 2014), and limits to the total amount of the equipment purchased ($200,000 in 2014). The deduction begins to phase out dollar-for-dollar after $200,000 is spent by a given business, so this makes it a true small and medium-sized business deduction.
Who Qualifies for Section 179?
All businesses that purchase, finance, and/or lease less than $200,000 in new or used business equipment during tax year 2014 should qualify for the Section 179 Deduction.
Most tangible goods including “off-the-shelf” software and business-use vehicles (restrictions apply) qualify for the Section 179 Deduction. Also, to qualify for the Section 179 Deduction, the equipment and/or software purchased or financed must be placed into service between January 1, 2014 and December 31, 2014.
The deduction begins to phase out if more than $200,000 of equipment is purchased – in fact, the deduction decreases on a dollar for dollar scale after that, making Section 179 a deduction specifically for small and medium-sized businesses.
What’s the difference between Section 179 and Bonus Depreciation?
The most important difference is both new and used equipment qualify for the Section 179 Deduction (as long as the used equipment is “new to you”), while Bonus Depreciation covers new equipment only.
Although Bonus Depreciation is not available in 2014 – in years when it is available, Bonus Depreciation is useful to very large businesses spending more than $2,000,000 on new capital equipment in tax years such a 2013. Also, businesses with a net loss in 2013 qualified to deduct some of the cost of new equipment and carry-forward the loss.
When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation – unless the business had no taxable profit in 2013 because the unprofitable business is allowed to carry the loss forward to future years.
Section 179′s “More Than 50 Percent Business-Use” Requirement
The equipment, vehicle(s), and/or software must be used for business purposes more than 50% of the time to qualify for the Section 179 Deduction. Simply multiply the cost of the equipment, vehicle(s), and/or software by the percentage of business-use to arrive at the monetary amount eligible for Section 179.
Here is a list of 2014 vehicles that for sure qualify for Section 179. There may be others, I have tried to find them all, but one could have slipped through the cracks. Note that the same models are eligible for 2015 also. The list is in brand order:
2014 Audi Q7 3.0T
2014 BMW X6 M
2014 BMW X6 XDRIVE35I
2014 Buick ENCLAVE 2WD
2014 Buick ENCLAVE 4WD
2014 Cadillac ESCALADE 2WD
2014 Cadillac ESCALADE AWD
2014 Chevrolet Truck SILVERADO C1500
2014 Chevrolet Truck SILVERADO K1500
2014 Chevrolet Truck SUBURBAN 2WD
2014 Chevrolet Truck SUBURBAN 4WD
2014 Chevrolet Truck TAHOE 2WD LS
2014 Chevrolet Truck TAHOE 4WD LS
2014 Chevrolet Truck TRAVERSE 2WD
2014 Chevrolet Truck TRAVERSE 4WD
2014 Dodge Truck DURANGO 2WD
2014 Dodge Truck DURANGO 4WD
2014 Ford Truck EXPEDITION 2WD
2014 Ford Truck EXPEDITION 4WD
2014 Ford Truck EXPLORER 2WD
2014 Ford Truck EXPLORER 4WD
2014 Ford Truck FLEX AWD
2014 GMC ACADIA 2WD
2014 GMC ACADIA 4WD
2014 GMC SIERRA C1500
2014 GMC SIERRA K1500
2014 GMC YUKON 2WD
2014 GMC YUKON 4WD
2014 GMC YUKON XL 2WD
2014 GMC YUKON XL 4WD
2014 Infiniti QX80 2WD
2014 Infiniti QX80 AWD
2014 Jeep GRAND CHEROKEE
2014 Jeep GRAND CHEROKEE
2014 Land Rover RANGE ROVER 4WD
2014 Land Rover RANGE ROVER SPT
2014 Lincoln MKT AWD
2014 Lincoln NAVIGATOR 2WD
2014 Lincoln NAVIGATOR 4WD
2014 Mercedes Benz G550
2014 Mercedes Benz GL350 BLUETEC
2014 Mercedes Benz ML350
2014 Nissan ARMADA 2WD
2014 Nissan ARMADA 4WD
2014 Nissan TITAN 2WD CREW
2014 Nissan TITAN 4WD CREW
2014 Porsche CAYENNE
2014 Ram CARGO VAN
2014 Ram RAM 2WD 1500
2014 Ram RAM 4WD 1500
2014 Toyota 4RUNNER 2WD LTD
2014 Toyota 4RUNNER 4WD LTD
2014 Toyota SEQUOIA 2WD LTD
2014 Toyota SEQUOIA 4WD LTD
2014 Toyota TUNDRA 2WD
2014 Toyota TUNDRA 4WD
2014 Volvo XC90
2014 Volvo XC90 AWD