Do you have excess budget for 2015? If you choose to purchase or lease equipment, including off-the-shelf software, for your business and put into service by 12/31/2015, your business is eligible for a tax deduction of up to $25,000 on your 2015 business taxes. Section 179 of the IRS tax code allows business to deduct the full purchase price of qualifying equipment during the 2015 tax year. The government has made this deduction available to encourage small businesses to buy new equipment and invest in themselves.
The Section 179 Tax Deduction at a Glance
2015 Deduction Limit = $25,000
The Section 179 Deduction is good for up to $25,000 on equipment and off-the-shelf software, purchased or financed in 2015. Additionally, the equipment must also be put into use before the end of day on 12/31/2015.
2015 Spending Cap on Equipment Purchases = $200,000
Due to the small business focus of this incentive, this is the maximum amount that can be spent on equipment before the Section 179 Deduction begins to reduce on a dollar for dollar basis.
Here is an example how Section 179 can be applied during the 2015 tax year:
How Section 179 Works
When you buy equipment for your business, it typically gets written off over time through depreciation. For example, if you spend $100,000 on workforce tracking for your company trucks, you could write off $10,000 a year for ten years.
Now, wouldn’t you prefer to write off the entire purchase price for the tax year in which it is purchased?
With the Section 179 Deduction, a business can write of the entire cost (up to $25,000) can be written-off on the 2015 tax return. This motivates small businesses to add equipment this year instead of waiting over the next few years.
Types of Equipment that Qualify for the Section 179 Tax Deduction
There are some restrictions on the type of equipment that qualifies for the Section 179 Deduction. Most material goods, such as, off-the-shelf software and business use vehicles qualify. For a complete list of qualifying equipment see below.
- Equipment (machines, gps tracking, cameras, etc.) purchased for business use
- Tangible person property used in business
- Business Vehicles with a gross vehicle weight in excess of 6,000 lbs
- Computer “Off-the-Shelf” Software
- Office Furniture
- Office Equipment
- Property attached to your building that is not a structural component of the building (i.e.: a printing press, large manufacturing tools and equipment)
- Partial Business Use (equipment that is purchased for business use and personal use: generally, your deduction will be based on the percentage of time you use the equipment for business purposes).
Section 179 can change each year without notice (Section 179 has even changed mid-year), so it benefits you to take advantage of this generous tax code while it’s available. Section 179 offers small businesses a great opportunity to maximize purchasing power.