The US Government continues Section 179 programs to stimulate business growth
What is Section 179 and how can my business benefit from it? (information from www.section179.org)
…Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It’s an incentive created by the US Government to encourage businesses to buy equipment and invest in themselves. It is sometimes referred to as the “SUV Tax Loophole” or the “Hummer Deduction” because many businesses have used this tax code to purchase qualifying vehicles (like SUV’s and Hummers.)
Section 179 works like this:
When your business buys qualifying equipment, normally, it is written off a little at a time through depreciation. For example, if your company spends $100,000 on a vehicle, it may be able to write off $20,000 a year for five years. Most companies were not allowed to write off the entire equipment purchase price the year it is purchased.
In fact, if a business could write off the entire amount, they might add more equipment this year instead of waiting. That’s the whole purpose behind Section 179. See the following graphic for an example of the savings that are available to you.
Limits of Section 179
Section 179 does come with limits – there are caps to the total amount written off ($250,000 in 2008), and limits to the total amount of the equipment purchased ($800,000 in 2008.) The deduction begins to phase out dollar for dollar after 800k, so this makes it a true small and medium-sized business deduction.
However, in 2008, businesses that exceed the $250k deduction limit can take a bonus depreciation of 50% on the amount that exceeds the limit. And then also take normal depreciation on the rest. Nice.
Who Qualifies for Section 179?
All businesses that purchase or finance less than $800,000 in business equipment should qualify for the Section 179 Deduction. In addition, most tangible goods qualify for the Section 179 Deduction (see list of qualifying equipment). Also, to qualify for the Section 179 Deduction, the equipment purchased must be placed into service between January 1, 2008 and December 31, 2008.
The deduction begins to phase out if more than $800,000 of equipment is purchased – in fact, the deduction decreases on a dollar for dollar scale after that, making Section 179 a deduction specifically for small and medium-sized businesses.