Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment, including some vehicles, and/or software purchased or financed during the tax year. It allows you to 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. Some 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. That particular benefit of Section 179 has been reduced in recent years, but is still quite lucrative if you qualify.
However, despite the SUV deduction being lessened, Section 179 is more beneficial to small businesses than ever. Today, Section 179 is one of the few government incentives available to small businesses, and has been included in many of the recent Stimulus Acts and Congressional Tax Bills. Although large businesses also benefit from Section 179 or Bonus Depreciation, the original target of this legislation was tax relief for small businesses – and millions of small businesses are actually taking action and getting real benefits.
Here’s How Section 179 works:
In years past, when your business bought qualifying equipment, it typically wrote it 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.
That’s exactly what Section 179 does – it allows your business to write off the entire purchase price of qualifying equipment for the current tax year.
Every year we give you a comprehensive review of the new rules, in this case for 2018. Next week, we’ll have for you the full report, completed by a CPA firm, including a list of eligible SUVs and trucks, so if you think you qualify, be sure to look at next week’s Car Pro newsletter. Click here to subscribe.
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