What Section 179 Means for Your Business

We want to make sure you're aware of every possible way to grow your business. This includes being aware of how the Section 179 tax deduction can benefit you. Although Section 179 does not increase the total amount you can deduct, it allows you to get your entire depreciation in one year rather than over an asset’s useful life.

Most people think of the Section 179 deduction as some complicated tax code, but it's not, and it's important to understand. Essentially, the code allows businesses to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. That means if you buy a piece of qualifying equipment, you can deduct the full purchase price from your gross income. Any long-term, tangible property that you use in your business more than 50% of the time can qualify for the deduction.

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Example: You spend $5,000 on a new automatic floor scrubber. Under Section 179 deduction, you would receive a first-year tax savings of $1,750 (assuming a 35% tax bracket). This would lower your cost of equipment to $3,250 after including the tax savings!

Use this Tax Deduction Calculator to calculate your savings.

Although all businesses that purchase, finance, and/or lease new or used business equipment during the tax year 2023 should qualify for the Section 179 deduction, there are some limitations. You can't deduct more in one year than your net taxable business income for the year. There are caps to the total amount written off ($1,160,000 for 2023), and limits to the total amount of the equipment purchased ($2,890,000 in 2023). The deduction begins to phase out on a dollar-for-dollar basis after $2,890,000 is spent by a given business (thus, the entire deduction goes away once $4,050,000 in purchases is reached), so this makes it a true small and medium-sized business deduction.

For more information and helpful resources, visit section179.org. You should also check with your accountant to find out the best way for you to take advantage of this valuable deduction and make sure you make your purchase before the end of the year.