When your business buys certain items of equipment, it usually gets to write them off a little at a time through depreciation (over time…each year). For example, if your company spends $50,000 on a machine, it gets to write off $10,000 a year for five years (price of different purchase vary so the write off amount will vary).

Now, wouldn’t it be better to write off the entire equipment purchase price for the year it’s purchased in? Of course (unless there’s a good reason not to).

A business could write off the entire amount of a purchase, and add more equipment this year instead of waiting over the next few years. For most small businesses, the entire cost can be written-off on the 2018 tax return (up to $1,000,000).

Limits to be aware of “caps”.

There are caps to the total amount written off ($1,000,000 for 2018), and caps on the total amount of the equipment purchased ($2,500,000 in 2018). The Section 179 Deduction begins to phase out dollar-for-dollar after $2,500,000 is spent by a given business, making it a true small to medium-sized business deduction.

Additionally, equipment, vehicle(s), and/or software must be used for business purposes more than 50% of the time to qualify for the Section 179 Deduction. All you have to do is multiply the cost of the equipment, vehicle(s), and/or software by the percentage of business-use to get the  amount the purchase eligible for the deduction.

Who can use Section 179?

Every business that purchase, finance, and/or lease less than $2,500,000 in new or used business equipment during tax year 2018 should be able to qualify for the Section 179 Deduction.