The Section 179 Deduction Explained

The IRSs Section 179 deduction is extremely important for every business owner to understand. s tax season approaches! you should "now what this law means! as it #ives you access to some outstandin# deductions that could save your business money. Section 179 allows you to deduct the full purchase price of any $ualifyin# e$uipment that you purchase or finance durin# the tax year. This tax incentive was ori#inally desi#ned to encoura#e businesses to invest in themselves by purchasin# e$uipment and supplies they need for their day% to%day operations. The deduction is extremely beneficial! as without it! you would only be able to write off the depreciatin# value of these expenses. &ither way! you would eventually #et the full price bac" in deductions! but because Section 179 allows you to #et bac" the full amount at once! you dont have to worry about spreadin# out those deductions over the course of multiple years. Qualifying for Section 179 'efore your business can levera#e the power of Section 179 deductions! you need to be sure that you $ualify under the law. (or )*1+! or#ani,ations that purchase or finance less than -) million in either new or used e$uipment for their business $ualifies. If your business is unprofitable in )*1+ and has no taxable income on which to use that deduction! then you can choose to use a .* percent bonus depreciation toward a year when your business does turn a profit. This /less than -) million0 re$uirement is the stipulation of Section 179 that ma"es it specifically #eared toward small businesses. ny property you wish to deduct under Section 179 must have been ac$uired for the use of your business and must have been purchased! and not rented. Specific types of eli#ible property include1 Tan#ible items! such as machinery! e$uipment! livestoc" or property contained in or attached to a buildin# Sin#le%purpose a#ricultural or horticultural facilities Stora#e facilities used for distributin# petroleum products 2omputer software purchased off the shelf 3roperty used primarily for business purposes 4at least .1 percent of the time5 2ertain types of real property! includin# $ualifyin# leasehold improvement! retail improvement and restaurant properties

Its important to note that there are certain types of properties not eli#ible for deduction under Section 179! includin# land and improvements and leased! ener#y and lod#in# properties. Deduction limits of Section 179 (or )*1+! there is a deduction limit of -.**!***. This affects the combined costs of all of the businesses you run! and not each individual business. 6ou do not have to deduct the full amount of your expenses! as you can choose how much you wish to deduct under the sections #uidelines. ny unclaimed items must be depreciated.

dditionally! there is a limit on the amount of property that is deductible under Section 179 that you can purchase in a #iven year. 6ou are re$uired to reduce your Section 179 deductions by a dollar for each dollar that your purchases #o above the )*1+ applicable limit of -) million. Additional limitations of the law 6ou are not allowed to use the Section 179 stipulations to deduct more in a sin#le year than your net taxable business income for that year. To fi#ure out exactly what your net taxable business income is! simply subtract your business deductions from your total business income. The deductions you subtract should not include Section 179 deductions! your .* percent self% employment tax deduction or any other operatin# losses that affect your taxes for that year. 3lease note that if you have a net loss for the year! you are ineli#ible for any Section 179 deductions for that year. (or more information about Section 179 deductions! we encoura#e you to contact (idelity 2apital. 7ur financial professionals are happy to discuss these stipulations and how your business can use them to save si#nificant money.