As a business leader, you’ve likely invested, or plan to invest, in technology equipment in 2017. To maximize your IT spend, we’ve outlined a quick Q&A of Section 179—an important tax benefit that helps alleviate some of your tax responsibility.
What is Section 179?
Section 179 is an economic stimulus in a form a tax benefit through accelerated depreciation that lessens a business’s tax burden.
Many business owners are unaware that the acquisition of qualifying equipment under a cash purchase or $1 purchase lease-option qualifies for the tax break provided under Section 179 of the Internal Revenue Code. Section 179 allows business taxpayers to take an outright deduction equal to the full purchase price of qualifying equipment purchased during the tax year up to $500,000.
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What is the 50-percent bonus depreciation?
After the customer clears their $500,000 dollar-for-dollar limit, Section 179 is still advantageous as they get to take 50% bonus depreciation on the remainder up to the total aggregate of $2 million. The remaining 50% they didn’t take of the bonus depreciation is still eligible for the traditional 20% MACRS depreciation. Below is an example of a business that acquired $2 million in equipment and how it is treated under section 179 for the 2017 tax year.
What equipment qualifies for Section 179?
- Equipment (machines, etc.) purchased for business use
- Tangible personal property used in business
- Business vehicles with a gross vehicle weight in excess of 6,000 lbs. (Section 179 Vehicle Deductions)
- Computer “off-the-shelf” software
- Office furniture
- Office equipment
Specifically, these items fall under Section 179: routers, copiers, switches, wireless access points, servers, phone systems, backup and disaster recovery appliances, workstations and monitors, laptops, ultrabooks, scanners, battery backups, storage (SAN, RAID, etc.) and “off-the-shelf” software.
Curious if any of your purchases apply? Get in touch with us.