Make The Tax Code Work For You
US Tax Code Section 179 sounds like more red tape from the IRS, but this is really a small-business-friendly advantage that owners need to be aware of and understand. If you’re not familiar with this, here it is in a nutshell. The Section 179 tax deduction allows businesses like yours to depreciate assets as expenses in the first year that they purchased them rather than over several years in smaller amounts. Depreciating assets all in the first year helps reduce overall profit, which is the figure you’ll ultimately end up paying taxes on.
The good news continues as the beginning of the 2022 tax year, there are more changes with the deduction increasing. For tax years beginning in 2022, the Section 179 deduction limit has been raised to $1,080,000. The monetary limit on equipment purchases is now $2,700,000. The maximum section 179 expense deduction for sport utility vehicles placed in service in the tax year beginning in 2022 is $27,000. Bonus depreciation will remain at 100 percent on eligible used or new assets placed in service before 2023. Bonus depreciation comes into play once the Section 179 limit has been reached. The 100-percent depreciation will stay in effect until January 1, 2023, when the first-year bonus depreciation deduction will decrease as follows:
- 80% for property placed in service during 2023
- 60% for property placed in service during 2024
- 40% for property placed in service during 2025
- 20% for property placed in service during 2026
It’s important to remember that to qualify for bonus depreciation, property that is classified as “listed property” under the tax code must be used more than 50 percent of the time for business. Another change brought by the Tax Cuts and Jobs Act is that computers are no longer classified as listed property. As a result, computers used less than 50 percent of the time for business may be eligible for deduction under Bonus depreciation.
Knowing the Section 179 tax deduction changes for each tax year is helpful as you plan your business purchases. Simplicity Equipment & Service has always been dedicated to helping its customers and brand partners make good decisions. This isn’t meant to be tax advice for your business but to bring this tax benefit to your attention for your personal evaluation. This should be reviewed by your tax advisor accordingly. Right now, SES has developed special programs and pricing to take advantage of this benefit. For more information, contact Simplicity at (800) 553-6190