Section 179 FAQ
What are the Section 179 dollar limits?
The Section 179 annual deduction limit is $1 million. The highest annual investment limit for qualifying equipment purchases is $2.5 million. These limits are indexed to inflation starting in 2019.
Does the purchase date of my equipment have an impact on my deduction?
Yes. The equipment must be purchased (financed/leased) and put into service between Jan. 1 and Dec. 31 of the current tax year to qualify for the deduction.
How do I know if the property I am purchasing or leasing qualifies for the Section 179 deduction?
Consult IRS guidelines or your tax advisor for a list of equipment that qualifies for Section 179.
What are some potential pitfalls of using Section 179?
Section 179 deductions are limited for multiple business entities. And, each state’s laws differ on how businesses can use the deduction. Unique planning is needed based on a small business owner’s tax bracket and cash flow. In addition, selling an asset after the deduction can affect your future tax preparation. Always consult a tax professional before deciding whether to use Section 179.
How does bonus depreciation work under the new format?
Bonus depreciation has increased to 100 percent through 2022. It has also expanded to used property. Bonus depreciation works in conjunction with the Section 179 deduction. You can take your deduction right off the top and then go back and take depreciation off what is left. So, bonus depreciation is taken after the deduction is used. That’s why it is useful for large businesses spending more than the Section 179 spending limit for that year. The bonus depreciation amounts will decrease to 80 percent in 2023, 60 percent in 2024, 40 percent in 2025 and 20 percent in 2026.
How can I calculate my savings by using Section 179?
Use our Section 179 calculator to estimate potential savings.
Can I buy or lease a vehicle and take the Section 179 deduction?
Generally, a vehicle must have a gross vehicle weight of more than 6,000 pounds. For instance, heavy construction equipment, large passenger vans and tractor trailers are the vehicles that qualify.
