Running a business involves a lot of costs, from equipment to office supplies, to salaries and wages. As a business owner, you have an ongoing need to save money any way you can. One of the best ways to maximize your savings is by taking advantage of tax deductions. One such deduction is called the Section 179 deduction. In this blog post, we’ll explore what the Section 179 deduction is, how it works, and some tips and strategies for taking advantage of the deduction to save money.
What Is the Section 179 Deduction?
The Section 179 deduction, also known as the “Expensing of Certain Depreciable Business Assets,” is a valuable tax incentive that allows businesses to deduct the full cost of qualifying property in the year of purchase and use. This deduction offers significant benefits for entrepreneurs and businesses looking to invest in tangible personal property, such as equipment, machinery, software, and even specific improvements to commercial property.
With the Section 179 deduction, businesses have the opportunity to optimize their financial resources, improve their bottom line, and stay competitive in today’s dynamic marketplace. It’s an essential tax strategy that empowers businesses to make strategic investments while enjoying immediate tax benefits. It provides a legitimate and legal means for businesses to maximize their cash flow and invest in necessary assets to drive growth and innovation.
Section 179 Benefits Include:
- Up to 80% deduction on new and used equipment
- Deduction limit $1.16M
- $2.89M spending cap on equipment purchases
- Payments deferred until 2024 for qualifying credits
How Does the Section 179 Deduction Work?
Let’s say your business decides to invest in a new piece of equipment, like a state-of-the-art printer, for a total cost of $100,000. Typically, you would depreciate this equipment over a period of time, spreading out the deduction over several years. However, thanks to the Section 179 deduction, you have the opportunity to deduct the entire $100,000 in the same year of purchase, providing an immediate and substantial boost to your tax savings. This tax incentive allows you to maximize your financial flexibility and enhance your overall business performance.
Maximizing Your Section 179 Deductions
Below are some valuable recommendations to help you optimize your section 179 deductions.
- Take advantage of the annual limit: The annual limit on Section 179 deductions is $1.16M, which allows you to deduct up to that in qualifying property purchased in the current tax year. This deduction serves as a valuable incentive for businesses to invest in assets that contribute to their growth and success. It’s an opportunity that empowers businesses to make strategic financial decisions and fuel their long-term sustainability.
- Be aware of phase-out limits: The Section 179 deduction comes with a phase-out limit. This means that as the total cost of qualifying property increases beyond a certain threshold, the deduction is gradually reduced. For the current tax year, the limit is set at $2389M. It’s important for businesses to be aware of this limit and plan their purchases accordingly to maximize their tax savings. By understanding the intricacies of the Section 179 deduction and its phase-out limit, businesses can make informed decisions to optimize their tax strategy and financial outcomes.
- Choose used equipment: The Section 179 deduction applies not only to new equipment but also to used equipment. Buying used equipment can be a smart way to lower your costs and make the most of the deduction, while still ensuring that you have the necessary tools to run your business efficiently. By considering used equipment, you can potentially find great deals and save even more money in the process. So, take advantage of the Section 179 deduction and explore the possibilities of purchasing used equipment for your business needs.
- Use financing to maximize the deduction: Financing your equipment purchases can be a strategic move to leverage the Section 179 deduction. Instead of buying the equipment outright, opting for financing options allows you to distribute payments over multiple years, potentially maximizing the tax benefit you receive. This approach not only provides financial flexibility but also enables you to allocate resources to other critical areas of your business, enhancing overall operational efficiency and growth potential.
- Consult with your accountant: Tax laws can often be intricate and convoluted, and the Section 179 deduction is no exception. Consulting with a knowledgeable accountant who understands the ins and outs of the Section 179 deduction can provide valuable guidance tailored to your specific business situation, ensuring that you make the most of this opportunity to optimize your tax benefits.
Section 179 Deductions Can Help Your Business
The Section 179 deduction is a powerful tool for saving money on taxes for business owners. By understanding how the deduction works and following these tips and strategies, you can significantly reduce your tax bill while also investing in the equipment and systems that keep your business running smoothly. Remember that this deduction has an annual limit and phase-out limits, so it’s essential to act quickly and plan accordingly to take full advantage of the savings available to you. Consult with your accountant to determine how best to incorporate the Section 179 deduction into your business strategy. With a little bit of planning and preparation, you can maximize your savings and help your business thrive.
Take advantage of the current opportunity to make strategic equipment purchases that will maximize your year-end Section 179 tax deduction benefits. ViewRidge Funding is here to assist you in providing a diverse range of equipment financing options tailored to the unique needs of your business.
Our financing options allow you to:
- Preserve working capital – equipment financing is a source of funding that allows you to not only keep your cash, but use it as working capital for other areas of your business such as expansion, improvements, marketing, or R&D.
- Manage risk – help mitigate the uncertainty of investing in a capital asset your business needs until it achieves a desired return, increases efficiency, saves costs, or meets other business objectives.
- Enjoy flexibility in terms and payments – hedge inflation risk because you can delay paying for your equipment in today’s dollars.
With ViewRidge, you’re just 24 hours away from the financing you need to improve and grow your business!
This information is for reference only and not intended to provide tax or legal advice.