Small Businesses Rejoice! This Tax Tip is Golden

As a small business owner, you are no stranger to scouting out every tax deduction possible. But we’ve got a golden nugget of wisdom you (and other small businesses) probably haven’t heard of, or aren’t taking full advantage of. Ready for it? Section 179.

What is Section 179?

No, this isn’t an obstacle course in the Hunger Games. Section 179 allows businesses to deduct the full price of any qualifying new or used equipment or software purchased or leased, rather than depreciating it over the life of the asset. The cap is $500,000. Section 179 was extended for 2016, and will potentially continue. Section 179 changes from year to year, and can even change in the middle of the year. So act on it while it’s around.

The Rules of Section 179

Just a few rules about Section 179. Equipment and software must be financed and in place by midnight December 31, 2016. Qualifying equipment includes business vehicles, computers, office furniture, and more. If it’s equipment or software, makes your business go (literally or figuratively), and isn’t a structural component of your office, it probably qualifies.

Need an example? Let’s say you spend $5,000 on a car or lease for accounting software. Your Section 179 deduction will be $5,000. And the cash savings on your purchase (assuming a 35% tax bracket) will be $1,750. So after tax savings, that car or software costs $3,250.

The Secrets to Section 179

And there’s a bonus (because we got your back). In conjunction with Section 179, bonus depreciation is icing on the deduction cake. This allows business owners to depreciate 50% of the cost of new equipment purchased in 2015. Bonus depreciation has been extended through 2019. The golden ticket that will make you feel like Charlie at Willy Wonka’s Chocolate Factory. You can use the two tax incentives together.

Ready for savings? We think 2016 is the year for an office upgrade.