What is the Section 179 deduction?

As is true with many IRS stipulations in the tax code, the amounts stipulated can vary on a year to year basis. This is true with the Section 179 deduction limitations which are deductions that are applicable to businesses who wish to purchase off-the-shelf software and equipment. The Section 179 deductions does two things in particular; it saves small business a substantial amount of money that would have gone to taxes and perhaps more importantly, it helps to boost the economy which is the intention of this Section.


It used to be that the cost of qualified business equipment could be written down or amortized over a period of years; the number of years depended on the perceived life expectancy of the asset. A simple example would be the purchase of a qualified asset with a purchase price of $100,000. The depreciation schedule for the asset would indicate a ten year amortization period, hence, $10,000 per year could be applied as a tax deduction. In business, any tax deduction is welcomed but Section 179 deductions allowed the business to benefit from the deduction much sooner, in most cases in the same business year as the asset was acquired.


There are a number of benefits to both the business and society; the business does not have wait for a number of years to get the full benefit, this provides the business and its owners more incentive to purchase qualified equipment sooner rather than later which has benefits to others, including those companies and its employees who make the equipment in the first place.


There are certain Section 179 deduction limitations. The equipment which is purchased and qualified must be used more than half the time for business purposes. Any use in excess of 50% qualifies for the same in the way of a deduction. If a vehicle for example was purchased and can be proven to be used for business 75 percent of the time then the deduction is equal to 75 percent of the cost, it is a very simple calculation.


The Section 179 deductions have increased significantly since becoming a part of the tax code; from $128,000 in 2007 to a retroactive amount of $500,000 for 2012. These amounts indicate that the IRS can and does change the qualifying amounts regularly.


The $500,000 tax deduction which is the applicable Section 179 deduction limitations is currently set to expire on Dec31, 2013 at which time the Section 179 limit will change. For complete information on what goods qualify you are invited to contact Walker Reid Strategies.

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