Are You Taking Advantage of Section 179 for 2016 Tax Year?
Section 179 Tax Deductions Have Been Extended for 2016
A major part of any business strategy is making the right investment choices to position your company for long term success; including choosing the right equipment, software, or partnership to push your business in the right direction. However, one of the toughest obstacles facing businesses is finding the capital to pay for that investment.
Congress granted business owners an extension of the Section 179 Tax Deduction late last year, making business owners rush to take full advantage of the deductions for the 2015 tax year. But there is still time to take full advantage of this deduction for 2016 tax year.
Consult with your own tax and financial advisors to review and assess the factors that may apply to your business and tax situation.
With the announcement, business owners can take advantage of purchasing equipment and/or software and deduct the full purchase price of financed or leased equipment and software that qualifies, for the current tax year. The equipment or software must be within the specific dollar limits.
What is the Section 179 Tax Deduction?
The Section 179 Tax Deduction of the IRS Tax Code allows a business to deduct, for the current tax year, the full purchase price of financed or leased equipment and off-the-shelf software that qualifies for the deduction.
Major expenses typically are required to be depreciated over a term of years to account for what is known as the "useful life of the purchase" as dictated by the IRS. However, with the Section 179 tax deduction, business owners can elect to immediately expense the full purchase price of the equipment or software.
For example, if you purchase equipment for $50,000, you would typically write it off a little at a time through depreciation. Such as, $10,000 per year for say five years. However, most businesses would prefer to write off the entire equipment purchase price for the year they purchased it. This makes it more attractive to purchase more equipment when needed, instead of carrying over the purchase amount minus depreciation.
Major expenses typically are required to be depreciated over a term of years to account for what is known as the "useful life of the purchase" as dictated by the IRS. However, with the Section 179 tax deduction, business owners can elect to immediately expense the full purchase price of the equipment or software.
For example, if you purchase equipment for $50,000, you would typically write it off a little at a time through depreciation. Such as, $10,000 per year for say five years. However, most businesses would prefer to write off the entire equipment purchase price for the year they purchased it. This makes it more attractive to purchase more equipment when needed, instead of carrying over the purchase amount minus depreciation.
What Purchases qualify for Section 179 Deductions?
If you're interested in taking advantage of the tax deductions this year, take a look at some of the purchases that would qualify for the Section 179 deductions:
- New or Used Machinery and Equipment purchased for business use
- Computer Software
- Office Equipment
- Partial Business Use (equipment purchased for business and personal use, restrictions apply)
When Can You Elect to Use the Section 179 Deduction?
You are eligible to take advantage of the Section 179 tax deduction for the tax year in which you placed the purchase(s) in service. For example, if you were to purchase a HP PageWide XL 8000 Printer and place the equipment into service by December 31, 2016, then you would be able to take advantage of the Section 179 deduction when you file your 2016 tax return.
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