Section 179

Each year Congress votes to extend or reduce the commercial tax benefits for financing. It’s important not to miss the opportunity to write off up to 35% of your equipment costs. Coastal Kapital wants you to minimize your tax liability to maximize your profit. FInd out more here:  https://www.irs.gov/publications/p946/ch02.html

 

Update as of  12/1/2015:

The IRS Section 179 deduction for 2015 is limited to $25,000, with a maximum of $2,000,000 per business. Bonus depreciation, a special depreciation allowance which has been in effect for several years, has been eliminated for the 2015 tax year.

 

What is a Section 179 Deduction:

Section 179 of the IRS Code allows small businesses to take a depreciation deduction for certain assets (capital expenditures) in one year, rather than over time. The benefit to taking the full deduction  for the cost of the item is that most items don’t last long enough for you to get the full depreciation.  For example – computers.  Most computers last between 3 to 5 years. If you depreciated them over 10 years, then you would lose out on the last 8-5 years worth of depreciation. So taking the depreciation up front makes more sense on most types business property.

 

What Property Qualifies?

For a full list of the property that qualifies, you can go to: https://www.irs.gov/publications/p946/ch02.html#en_US_2013_publink1000107394

In most cases the property must be “tangible, depreciable, personal property which is acquired for the active conduct of a trade or business.” Land and buildings are not qualified property.  And the property must be purchased and put into service in the year in which you claim the deduction. This means the asset must be up and working in the year you take the deduction.  You cannot purchase the asset and let it sit there.

 

What Property Does Not Qualify?

For a full list of the property that do not qualify, you can go to:
https://www.irs.gov/publications/p946/ch02.html#en_US_2013_publink1000107404

Property you acquire only for the production of income, such as investment property, rental property (if renting property is not your trade or business), and property that produces royalties, does not qualify. And you can select the section 179 deduction only if you use the property more than 50% for business in the year you place it in service.

 

Coastal Kapital Disclaimer: Section 179 deductions are complicated. The information in this article is not intended to be tax or legal advice, but to inform you of what may be available. Each business situation is different and tax regulations change frequently. Please consult your tax professional before buying property with the intent to take a Section 179 deduction.