On January 2, 2018, H.R.1 was signed into law. It revised several previous tax laws regarding tax deductions for technology and other business equipment. The deduction limit for Section 179 increased to $1,000,000 for 2018 and beyond. Also, businesses can immediately expense more under the new law – the limit on equipment purchases was increased to $2.5 million.
The IRS 179 Deduction was enacted to help small businesses by allowing you to take a depreciation deduction for certain assets in one year, rather than depreciating them over a more extended period.
It lets you take an outright deduction equal to the full purchase price of a qualifying piece of equipment. This means you can lessen your taxable income, and ultimately your tax burden.
Section 179 always expires at midnight, December 31st. To take advantage of Section 179 this year, you must buy (or lease/finance) your equipment, and put it into use, by midnight 12/31/2018.
The bonus depreciation is 100%. It was made retroactive to 9/27/2017 and is good through 2022. It also now includes used equipment.
The Tax Cuts and Jobs Act (TCJA) extended the ability to write off Bonus Depreciation through 2026 (or 2027 for certain assets) It made other changes to the write off percentages and the types of assets that qualify for Bonus Depreciation.
The 100% deduction will stay in place for five years. It will step down each year after, and end in 2026.
After 2022, the depreciation percentage will be reduced by 20% each year:
Business equipment (including technology and software) financed or leased still qualifies for Section 179. This is true even if you’re making payments on equipment over several years. However, the equipment must be placed in service for business purposes to qualify.
Equipment qualifies if it’s purchased under a capital lease, cash sale or a dollar buyout, and where you’re considered to be the owner of the equipment and maintain full control over the residual value.
This is a significant and impactful advantage that you should take advantage of if you want to buy equipment and lessen your tax burden.
It’s essential that you check with your accountant or another tax professional about any specifics regarding your business or industry.
Contact the team at NOVA Computer Solutions. We can answer your questions about Section 179.
As a consultant to dental practices, I help my clients maximize what can be done with their technology to maximize production and profit.