Section What Now? What You Need To Know About IRS Section 179
What is Section 179? Not sure how these tax deductions benefit you? No worries, we’re here to help!
What is Section 179?
Section 179 started when Congress passed the Small Business Tax Revision Act of 1958. The goal hasn’t changed over time — it’s to help small business owners stimulate business investments and help reduce the tax burden those investments bring.
The tax deduction allows businesses to deduct the total purchase price of qualifying equipment for the current tax year instead of writing off the purchase over several years (which is called depreciation). This means that December 31 is the cutoff to claim deductions for the calendar year.
Both new and used equipment qualify for the incentive. You must use the equipment in the tax year you are taking the deduction. This means that the equipment needs to hit the dirt before the end of the year, or it will be deducted next year.
What does this mean?
Say you need a new skid steer to help with landscaping projects and clear snow. Instead of buying that machine and then depreciating it over time, you could use the deduction and expense the total purchase price.
Expensing the machine purchase price offsets the current year’s income tax liability, which could lower the amount of money owed at the end of the year!
What qualifies for Section 179?
Qualifying equipment must be tangible, meaning it must be a physical asset like equipment, furniture, and computer software. Things like buildings and land are not eligible.
The equipment must be used at least 50% of the time for business purposes. If it falls under 50%, then the machine doesn’t qualify.
Examples of eligible equipment include:
- Skid Steers
- Compact Track Loaders
- Dozers
- Excavators
- Motor Graders
- Wheel loaders
- Backhoes
For more information about which equipment qualifies, read the IRS guidelines here.
What equipment doesn’t qualify?
Just like other tax deductions, only some things can qualify. For example, some vehicles are excluded due to their size and type. Most of what Southeastern carries will be deductible, but ask your accountant to be sure.
For more information about what is ineligible, read the Section 179 guidelines here.
Is used equipment eligible for the deduction?
Yes! In the past, used equipment was ineligible, but this has changed over the years. Plus, with December 31 quickly approaching, used equipment might be the way to go if you want to take advantage of the tax deduction this year.
Southeastern carries hundreds of pieces ready to get in the dirt NOW! You can see what’s available here.
How much does it cover?
According to the IRS, Section 179 covers up to $2,700,000 when you purchase equipment in 2022. But remember the machine must be used 50% of the time for business purposes.
Before purchasing equipment, talk with your tax professional to make sure that Section 179 deductions are right for you.
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Southeastern Equipment and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.
