We at Ted Britt understand that tax season can be quite the headache to get through. What if we told you that as a business owner, you have an upper hand when it comes to some pretty hefty deductions? What if we told you that new truck you’ve been eyeing for your business has the potential to be written off entirely? Or that luxury sedan you could use to accommodate your clients may be used to offset your business income for this year? Well, that happens to be exactly what we’re saying. Allow us to introduce you to the advantages of the Section 179 tax deduction.
Section 179: Basics
Section 179 deduction allows for your business to purchase vehicles and equipment and allow the entire purchase to be expensed in the year of the purchase. Section 179 spurs economic growth and allows for small businesses to gain ground with less monetary risk. Your company can now take advantage of this tax break, but purchases must be made by the end of the year!
Section 179: Details
Here are the main restrictions to take note of:*
The company must adhere to the $2 million cap on equipment purchases.
The annual deduction cap is $500,000.
The bonus depreciation rules allow taxpayers to deduct 50% of the cost of qualifying property in the year that it is placed in service (available on new equipment only).
The vehicle (or equipment) must be used for business at least 50% of the time.
Must be purchased and used by 12/31/2016.
*Restrictions and deductions subject to change from year to year. These listed here are for the 2016 operations tax year.
The IRS defines certain types of vehicles differently based on capacity, size, and usage. However, if you purchase a vehicle for your trade or business, there is potential for a full or partial write off. The amounts for each business write-off will vary, but as a small business owner, you understand that saving every little bit counts.