What is Section 179?

November 25th, 2013

Several years ago, Section 179 was often referred to as the “SUV Tax Loophole” or the “Hummer Deduction” because many businesses have used this tax code to write-off the purchase of qualifying vehicles at the time (like SUV’s and Hummers). But, that particular benefit of Section 179 has been severely reduced in recent years, see ‘Vehicles & Section 179′ for current limits on business vehicles.

Today, Section 179 is one of the few incentives included in any of the recent Stimulus Bills that actually helps small businesses. Although large businesses also benefit from Section 179 or Bonus Depreciation, the original target of this legislation was much needed tax relief for small businesses – and millions of small businesses are actually taking action and getting real benefits.

Essentially, Section 179 works like this:
When your business buys certain items of equipment, it typically gets to write them off a little at a time through depreciation. In other words, if your company spends $50,000 on a machine, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example).

Now, while it’s true that this is better than no write off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it.

In fact, if a business could write off the entire amount, they might add more equipment this year instead of waiting over the next few years. That’s the whole purpose behind Section 179 – to motivate the American economy (and your business) to move in a positive direction. For most small businesses (adding total equipment, software, and vehicles totaling less than $500,000 in 2013), the entire cost can be written-off on the 2013 tax return.

For additional information, check out the Section 179 calculator: http://www.section179.org/section_179_calculator.html

If you have any questions about Section 179 and how it applies to you, get in touch with your accountant.

If you can benefit from Section 179 and need to purchase new computer equipment (see our article on Windows XP – End of Life), give us a call at 228-392-7133.

Source: www.section179.org