Section 179 Tax Deduction FAQs

What is the Section 179 Tax Deduction?
Section 179 is the IRS Tax Code that allows a business to deduct the full purchase price of equipment and off-the-shelf software on their income taxes as an expense, rather than requiring that the property be depreciated over time.

How much can I deduct?
The 2017 maximum deduction limit is $500,000. Equipment must be purchased and placed into service before 12/31/2017 to qualify for a Section 179 tax deduction for 2017.

What is the Bonus Depreciation?
Bonus Depreciation allows a business to deduct 50% of what is spent in 2017, above the Section 179 cap, up to $2,000,000.

What is the first-year MACRS Depreciation?
Standard first-year MACRS (Modified Accelerated Cost Recovery System) deduction applies to the remaining amount up to $2,000,000.

What types of purchases qualify for a Section 179 deduction?
Most tangible office equipment, office furniture, computers, machinery, technology and off-the-shelf software qualify for the deduction.

What types of agreements qualify for a Section 179 deduction?

  • Equipment financing agreement
  • Equipment leases with a $1.00 purchase option (aka Capital Leases)
  • Loan Agreement

What type of purchase does NOT qualify for Section 179 deduction?
Operating Leases — those with a purchase option (i.e.,10% Purchase Option Leases, Fair Market Value Leases) at the end of the agreement.

When can I take a Section 179 Deduction?
A Section 179 Tax Deduction must be taken in the year the equipment or software is purchased and put into use. For example, equipment purchased and put into use in 2017 would be deducted off 2017 taxes.

For additional information, consult your personal tax advisers.

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