Section 179 Depreciation Deduction: What Every Business Owner Needs To Know

February 19, 2016 / Reading: 3 minutes

The Section 179 IRS code refers to the ability for small businesses to use what is called a depreciation deduction for capital expenditures over the course of a year, as opposed to the entire life of an asset. This special deduction rule allows for small businesses to deduct costs immediately, freeing up more capital to grow and expand business each and every year.

A common scenario of how a small business can take advantage of this depreciation deduction code is upgrading the computer network or mobile network of the company. Rather than having to wait to receive deductions from this investment, you can deduct the full cost of those purchases of that year.

Depreciation Bonus

Section 179 allows for small businesses to completely write off the cost of a new renovation immediately. The depreciation bonus section is only for losses created under business taxable income. If you sustain losses that go back farther than two years, you will not be able to get that depreciation deduction under Section 179.

Small businesses, like tree trimming, roofing, plumbing, and etc. all see amazing growth and stability opportunities, thanks to the passing of the Section 179 depreciation deduction. For businesses that need to buy a lot of specialized equipment, need to do a lot of maintenance, or are simply waiting to do a big upgrade, none of this would be possible without the new IRS code. Don’t forget, this also includes property add-ons, vehicles,

More Opportunity

With higher Section 179 limits, small businesses are much more confident with the direction they want to take their businesses. Rather than planning over the course of 5-10 years for expansion, it is now more realistic to make a big purchase for heavy machinery, renovations, and etc. without delay.

Depreciation bonus turns a huge gamble of $1,000,000 into a more typical $500,000 investment, that will in-turn allow a business to avoid paying a huge chunk of taxes, if deadlines are accounted for. The bonus comes in because not only do you get the deduction, but you also get lower tax estimates for the following quarter, as if you didn’t greatly increase your assets.

For 2016, the total spending cap for qualifying equipment is currently at $2,000,000.

Time is of The Essence!

Experts believe that, eventually, the bonus depreciation may be done away with, but until then it will continue to energize those who are trying to revitalize their brands, start a new chapter in their lives, and enter into an extremely high-risk market without gambling everything they have away.

All you need to do is fill out a separate IRS form whenever you purchase or lease qualified equipment or upgrades. That’s all that is required to qualify for depreciation deduction, no attorney or accountant is necessary, as long as you are clear that your purchases do qualify.

Don’t wait too long, as Section 179’s rules can change each year, as well as any Stimulus Acts that may strengthen the benefits or add additional years of deduction.

DISCLAIMER : While the information in this article is derived from sources believed to be accurate, it is not intended as tax or legal advice, and cannot be relied upon for any purpose without the services of a qualified professional. It is always best to check with the IRS and see what their current rules and options are.