Section 179
a tax deduction story
By Bryce Ray
I am not a tax expert, in fact the thought of taxes has always given me anxiety, but there is something special about the Section 179 Tax Deduction of the U.S. Tax Code. Who doesn’t want to reduce their tax liability?
This specific tax benefit addresses and assists in recouping the cost of property or equipment by deductions for depreciation. According to the IRS, “Depreciation is an annual income tax deduction that allows you to recover the cost or other basis of certain property over the time you use the property. It is an allowance for the wear and tear, deterioration, or obsolescence of the property.” In order to take advantage of this benefit, the following must be true about your property.
1. You own the property or equipment.
2. It must be used in your business.
3. It must have a determined useful lifespan.
4. The lifespan should be more than a year.
If you own or operate a business and you have equipment or assets that meet that criteria, make it a point to discuss IRS Section 179 with your Accountant or Tax Advisor ASAP. Likewise, if you sell equipment, educate your customers about this special tax deduction.
To illustrate this point more clearly let me share a hypothetical example. Imagine a medical practice called M Medical just purchased a new state-of-the-art ultrasound system used 100% for business purposes and patient care at a total cost of $250,000 and no salvage value. Normally without the Section 179 deduction, M Medical would take that ultrasound system and depreciate it over the course of 5 years at $50,000 each year. If M Medical takes advantage of IRS Section 179 M Medical may depreciate/write-off the entire equipment cost of $250,000 in the current year thus reducing M Medical’s current year taxable income.
In 2023, (taxes filed in 2024), the maximum Section 179 deduction is $1,160,000 – keep an eye out for 2024’s figures. Capital type equipment (new or used) is usually considered deductible expenses within Section 179.
Either way please consult with your tax advisor or accountant for the applicability to your business so that you can lock in this special tax deduction and get capital equipment for your business.
Below is the link to IRS.gov for additional reference.