Under Section 179 of the United States Internal Revenue Code, taxpayers can elect to deduct the cost of specific types of property, such as industrial equipment, on income taxes as an expense, rather than requiring the cost of the assets to be capitalized and depreciated. For EquipNet’s clients, this means when a piece of machinery or equipment is purchased for business use, companies are eligible to receive a tax deduction for buying and using them.
Section 179 Updates
Due to the the Tax Cuts and Jobs Act of 2017, businesses are now benefiting even more by purchasing and using assets. This change started on January 1, 2018 and businesses can now deduct up to $1 million for qualifying asset purchases up to $2.5 million. For any amount that exceeds $2.5 million, the deduction phases out on a dollar-for-dollar basis. After 2018, these limits will be indexed to inflation. If only part of the cost of the qualified property is deducted, you can generally depreciate the remaining cost. Last year, this deduction was only $500,000.
In addition, companies can use this deduction for nonresidential building needs, such as:
• Fire & security alarms
• HVAC systems
100% Bonus Depreciation
Aside from the $1,000,000 write-off, companies can also take 100% bonus depreciation on the adjusted basis of their qualified equipment gained in 2018. This depreciation is effective after September 27, 2017 and is good through 2022. Financing or leasing with a $1 buyout qualify as well.
There are two general requirements from the IRS to apply for the Section 179 Deduction –
- The “qualified property” must be “tangible, depreciable, personal property which is acquired for use in the active conduct of a trade or business.”
- The property must be acquired and put into service in the same year the deduction is claimed. When an asset is put into service, that means it is set up and working and it is being used for your business. If you buy a piece of equipment and it is sitting idle in storage, it does not qualify.
TAKE ADVANTAGE OF 2018 TAX INCENTIVES WITH EQUIPNET: