SECTION 179 TAX DEDUCTION
Section 179 of US tax code allows businesses to deduct the full purchase price of qualifying equipment, vehicles and/or software purchased or financed during the tax year. That means that if you buy (or finance) a piece of qualifying equipment, you can deduct the FULL purchase price from your gross income. It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves.
As of this year, the Section 179 spending cap is $1,160,000, the deduction limit is now to $1,160,000 and bonus deprecation is 100%.
2023 Section 179 – Deduction Limit $1,160,000
$1,160,000 maximum on individual items of new or used equipment, vehicle and software purchased on or before December 31, 2023. This means that if a business owner purchases or finances a piece of equipment, they can deduct the full purchase price (up to $1,160,000) from their gross income.
2023 Section 179 – Threshold Limit $2,890,000
Allows business owners to purchase more equipment and still have the benefit of the Section 179 deduction. The deduction begins to phase out on a dollar-for-dollar basis after $2,890,000 is spent by a given business.
100% Bonus Depreciation
Right now in 2023, it is being offered at 100%. In prior years, bonus depreciation used to combine with Section 179 and be applied at 50%-80% after threshold was reached, however in 2022, the bonus depreciation percentage increased to 100% and used equipment is now eligible.
SAMPLE CALCULATION
