Tax Provisions that can save you money on capital expenditures

Tax Provisions that can save you money on capital expenditures

Jun 20, 2018

What is the Section 179 Deduction?

The Section 179 Deduction has key tax saving provisions for U.S. businesses that could save you money on capital expenditures.

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 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.

And 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.

This has made a big difference for many companies and the economy in general.  Businesses have used Section 179 to purchase needed equipment right now, instead of waiting. For most small businesses, the entire cost of qualifying equipment can be written-off on the 2018 tax return (up to $1,000,000).

What does this mean for your business:

This is translated to positive cash flow by reducing federal income taxes. 

Qualified capital expenditures include but are not limited to lift trucks, warehouse systems and inventory storage equipment.  The capital asset must be placed in service before December 31, 2018 to qualify for this tax advantage.