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How Small Business Owners Can Maximize Tax Savings With Section 179 Deduction

Nov 21, 2023
Posted by: Stearns Bank
Optometrist small business owner sitting at desk

As a small business owner, you're always seeking ways to increase profits, improve cash flow, and reduce costs. One valuable option is the Section 179 tax deduction for equipment purchases.

With Section 179, you can deduct the full cost of qualifying equipment in the year of purchase, instead of depreciating it over time. This provides an immediate tax break to help your bottom line.

Keep reading to discover more about Section 179, how it works, and how to maximize the benefits for your business.

Section 179 Deduction Explained

Section 179 allows you to deduct up to $1.16 million of qualifying equipment purchases in 2023. This limit begins phasing out once total spending exceeds $2.89 million.

Eligible property includes tangible goods like machinery, computers, furniture, and vehicles used over 50% for business. Some software and productions also qualify. You can find additional details about Section 179 on the IRS website.

Section 179 often provides greater tax savings compared to slowly deducting costs through depreciation over years. And recent tax law boosts have made it even more beneficial!

Utilizing Bonus Depreciation for Tax SavingsSmall business owner optometrist using financed equipment

For major equipment purchases this year, combine Section 179 with bonus depreciation for amplified tax savings.

Bonus depreciation lets you deduct an additional percentage of an asset's cost in year one. The 2023 bonus depreciation rate is 100% for items placed in service before January 1, 2023.

Used together strategically, Section 179 and bonus depreciation can significantly lower your taxable income when acquiring new equipment or assets. Consult a tax professional to maximize benefits.

Advantages and Considerations for Small Business Owners

Before making purchasing decisions:

  • Review income, expenses, growth plans, and cash flow needs
  • Consider useful life, costs, and financing options for potential acquisitions
  • Model tax scenarios under different purchase options
  • Seek guidance from a tax pro on timing strategies and optimization

With planning, you can align purchases with business goals and make the most of available tax deductions.

Disclaimer: This article contains general educational tax information only. Please consult a qualified tax professional for guidance related to your specific business’s financial and tax situation.

Stearns Bank: Your Partner in Small Business Growth

At Stearns Bank, our business lending experts aim to provide guidance tailored to your company's needs. We'll explore equipment financing strategies to support your growth plans while optimizing tax deductions like Section 179.

For example, Dr. Tommy Elton financed new retinal cameras through Stearns Bank to take advantage of increased Section 179 limits inDr. Tommy Elton, Stearns Bank Customer 2018.

"It was simple. The paperwork wasn’t overdone and I could focus on my business and let Stearns Bank take care of all the details," Dr. Elton said. "I can’t thank Stearns Bank enough for making my life easier."

Whether upgrading equipment or reviewing leasing options, we make it easy to discuss approaches customized for your business. Our knowledgeable team is ready to partner with you for fully-informed financial decisions.

Reach out to start a conversation about equipment financing tailored to your small business growth goals. At Stearns Bank, our expertise is focused on helping you maximize the opportunities ahead.

Need Financing for Equipment?   Our experts can provide customized solutions that fit your business' revenue  cycle. Explore equipment financing options