All About Section 179
If you’re curious about how Section 179 can help with tax savings for your machinery or manufacturing business, keep reading.
Section 179 is a tax deduction that allows businesses to deduct the full cost of qualifying equipment in the year it is purchased and placed in service. This can be a significant tax savings for businesses that purchase new equipment, and it can help them to improve their bottom line.
How Section 179 Works
Under Section 179, businesses can deduct the full cost of qualifying equipment up to a certain dollar limit. The dollar limit for 2023 is $1,050,000.00. This means that a business can deduct the full cost of up to $1,050,000.00 of qualifying equipment in the year it is purchased and placed in service.
Are you eligible?
Not all businesses are eligible for the Section 179 deduction. To be eligible, a business must:
Be a taxpayer
Have a taxable income
Use the equipment in a trade or business
The following types of equipment qualify for the Section 179 deduction:
Tangible personal property
Computers and software
Machinery and equipment
Vehicles (with a gross vehicle weight of more than 6,000 pounds)
Limits on the Deduction
The Section 179 deduction is subject to several limits. The most important limit is the dollar limit, which is $1,050,000.00 for 2023. If a business purchases more than $1,050,000.00 of qualifying equipment in a year, it can only deduct the first $1,050,000.00 of the cost.
How to Claim the Deduction
The Section 179 deduction is claimed on Form 4562, Depreciation and Amortization. The deduction is taken in the year that the equipment is purchased and placed in service.
Be sure to keep careful records of qualifying equipment purchases, including the date of purchase, the cost of the equipment, and the date the equipment was placed in service. These records will be necessary to claim the Section 179 deduction.
As always, we do not give tax advice and request that you ask your consultant if you qualify for Section 179.