Taxes have a way of affecting small businesses and their ability to grow if not properly managed. However, many such businesses are unaware of the benefits of section 179, a tax code that can provide several incentives and write-offs for small businesses.
What Is Section 179?
Section 179 is a US internal revenue tax code that applies to a deduction for depreciable business assets. It allows businesses to write off the full costs of eligible property in the first year of purchase and service rather than spread it over several years.
What Is A Section 179 Expense?
A section 179 expense is an annual non-cash allowance that can be claimed as an income tax deduction of any section 179 property. As such, when a taxpayer chooses to treat the cost of any section 179 property as an expense, the business gets a deduction for the life of the property in the tax year in which it’s used without any cost overlays.
What Is Section 179 Deduction?
Section 179 deductions write off the costs of qualified MACRS Section 1245 properties, such as tangible furniture and pieces of equipment, in use for more than 50% of business use during the first year.
What Qualifies For Section 179?
Most equipment and properties used for businesses will qualify for section 179. However, remember that the property must be new to you; thus, purchased and used under the tax year you claim. Below are some qualifying assets for section 197:
- Computers and computer software.
- Personal properties used for over 50% of business use.
- Office furniture.
- Manufacturing and producing equipment, i.e., printers, copiers, etc.
- Work vehicles.
Some improvements to office buildings, such as security systems, HVAC, alarms, and roofings, can also qualify for section 197.
What Vehicles Are Eligible For Section 179?
The internal revenue section 179 vehicle list is categorized into SUVs, cars, and other vehicles. Note that for a vehicle to qualify, you must use it more than 50 percent of the time for business purposes. So now, what vehicles are eligible for section 179?
- Work vehicles that are used for business only.
- Cars not over 6000 pounds gross vehicle weight.
- Heavy SUVs, Pickup, or Vans with over 6000 pounds gross vehicle weight but less than 14000 pounds can qualify for partial Section 179 deduction.
- Other vehicles include exceptions such as specialty vehicles, i.e., ambulances, tractors, trailers, etc.
What Can You Take Section 179 On?
You can take section 179 on business expenses related to depreciable properties such as machinery, cars, computers, and office equipment. This way, your business can get a tax break when purchasing important equipment instead of capitalizing on them and depreciating it over a long time.
What Is The Purpose Of Section 179?
The purpose of section 197 is to encourage and help small businesses to purchase necessary assets required without breaking the bank. It also helps them maximize their little capital by investing the money saved through the tax write-off to grow the business in another aspect.
Utilizing section 179 can greatly benefit small businesses to help minimize their taxes. Thus, increasing profits and their ability to invest in the growth of the business.