Set your company up for success in 2024 by taking advantage of a Section 179 deduction in 2023
IRS tax code now allows companies to deduct the full purchase price of qualifying equipment or software financed during the tax year. This tax incentive is designed to help small business owners. So, if you buy or lease a piece of qualifying equipment, you can deduct the full purchase price from your company’s gross income.
Can Section 179 be taken on used equipment?
Yes! Businesses that purchase, finance and/or lease new or used business equipment should be able to take advantage of a Section 179 deduction.
- The deduction limit for 2022 was $1,000,000.
- There is a spending cap of $2,500,00 – that’s the maximum that can be spent on equipment before the deduction is reduced on a dollar-for-dollar basis.
- Equipment must be financed or purchased and put into service before 11:59 p.m. on December 31, 2023.
- Qualifying equipment must be used for business purposes more than 50% of the time to qualify for the deduction.
- More details can be found on irs.gov
These features can make leasing or financing very attractive – the amount you save on taxes can be more than the payments on your new equipment! A non-tax capital lease can allow your business to reduce out-of-pocket cash while still taking advantage of the deduction.
This deduction is different than Bonus Depreciation — which is typically used by very large businesses spending more than the 179 spending cap.
Sample Construction Equipment Tax Deduction
Let’s say you are in the market for an articulating boom lift. A unit with 166 hours is available on buyfleetnow.com for $54,000. Here are your potential tax deduction savings:
Purchase price: $54,000
Tax bracket: 35%
Section 179 Deduction: $54,000
Bonus Depreciation: $0
Normal first-year depreciation: $0
Total first-year deduction: $54,000
Cash savings on your purchase: $18,900
Lowered cost of equipment: $35,100 (after tax savings)
Calculate your tax deduction savings quickly on this page.
Don’t let the tax year end without helping your company by investing in equipment to expand at a reduced cost thanks to the Tax Cuts and Jobs Act.
Photo by StellrWeb on Unsplash
IronTek Solutions provides no express or implied legal advice with this information.