Businesses can deduct a variety of assets under Section 179, including:
• Machinery and equipment (e.g., manufacturing tools, construction equipment).
• Computers, software, and office furniture.
• Vehicles used for business purposes (certain weight restrictions apply).
• Certain improvements to commercial property, such as HVAC systems, roofs, and security systems.
For 2024, businesses can deduct up to $1.22 million in qualifying equipment purchases. However, the deduction phases out if total equipment purchases exceed $3.05 million. This limit ensures that the benefit primarily supports small and mid-sized businesses.
• Section 179: Allows immediate expensing of qualified purchases, but the deduction is limited to the business’s taxable income.
• Bonus Depreciation: Can be used after Section 179 deductions are applied and allows businesses to deduct a percentage of remaining costs. As of 2024, bonus depreciation is 60% but will continue to phase down in future years.
• Plan equipment purchases before year-end to ensure eligibility.
• Consult a tax professional to determine the best mix of deductions and depreciation.
• Keep detailed records of purchases, including invoices and financing documents.
• Immediate tax savings: Reduce taxable income significantly in the year of purchase.
• Encourages reinvestment: Frees up cash flow to reinvest in business growth.
• Simple application process: Businesses claim the deduction on IRS Form 4562 when filing taxes.
Final Thoughts: Taking full advantage of Section 179 deductions can be a game-changer for small businesses looking to lower tax liability while upgrading equipment. If you're considering major purchases this year, now is the time to act. Our tax experts can help ensure you’re making the most of available deductions to maximize your savings.
