Unlock Tax Savings with Section 179 for Your Business in 2023
Are you looking to ease the financial impact of equipment and software costs on your business this year? If so, you might want to take advantage of the Section 179 deduction before time runs out for 2023!
When trying to start a new business, expand an existing business, or just upgrading your equipment, the purchasing costs can be overwhelming to the budget. Machinery, equipment, and other tools like geospatial solutions can quickly add up. But the Section 179 tax deduction can help ease the impact these purchases have on your business by enabling your company to buy and begin using assets NOW – and obtain money back in your pocket.
Continue reading to learn what you can claim under Section 179 to help your business’s bottom line.
What is Section 179? The Section 179 tax deduction is an incentive intended for businesses that spend less than $4.05 million per year on equipment purchases. If your business qualifies, then you're allowed to deduct the entire cost of equipment the year you purchase it as long as you begin using the equipment that same year. This provides the business with major tax benefits. Instead of using depreciation to slowly write off equipment purchases, this tax incentive allows you to write off the total cost of the qualifying equipment. And you can purchase the equipment very late in the year and still get a full year’s deduction.
QUALIFYING ASSETS UNDER SECTION 179
What assets can you claim under Section 179? Equipment, software, and machinery – whether new or used – can qualify. However, it must be the first time your company is purchasing the asset, and you must put it into use within the same year. Qualifying assets include:
- Geospatial and surveying equipment such as robotic total stations and GNSS receivers
- Geospatial and surveying software such as data collection software and data processing software
- Construction laser levels
- Drones and mobile mapping equipment
- Wide format printers
- Equipment acquired through bank or similar financing, or equipment purchased using a capital lease
HOW DOES SECTION 179 BENEFIT YOUR BUSINESS?
Section 179 can benefit your business by allowing a tax deduction for the total purchase price of newly purchased equipment, software, and machinery. This tax deduction can be claimed before you’ve fully paid for the equipment or asset.
Getting this deduction quickly can provide major tax relief, especially for new businesses needing to purchase startup equipment. Another group that can receive substantial benefits are companies trying to gain market share and/or expand their operations. Purchasing new equipment can come at a high cost. Section 179 is designed to incentivize small businesses to invest in their growth and immediately implement new equipment.
WHAT ARE THE LIMITS OF SECTION 179?
While the Section 179 deduction benefits businesses by letting them write-off equipment, it has its limitations, including an equipment purchase cap and a deduction limit. In 2023, the deduction limit for Section 179 is $1,160,000. In addition, the maximum deduction is capped at your company’s next income, preventing businesses from creating a tax loss. To help overcome these limitations, Bonus Depreciation can help.
INTERESTED IN UPGRADING YOUR EQUIPMENT?
Bonus depreciation offers taxpayers a deduction for a certain percentage of equipment and software costs. For 2023, this percentage is set at 80%. Unlike Section 179, Bonus Depreciation doesn’t have annual limits, offering greater deductions.
The key point to remember is that it is possible to use both methods in the same year to reduce your state and federal income taxes. Companies will often utilize the Section 179 deduction until they've reached the Section 179 deduction limit, and then utilize Bonus Depreciation for additional assets. To determine the best tax strategy for your business, a tax or legal professional should be consulted.
CONSULT WITH A TAX OR LEGAL PROFESSIONAL
To determine which strategy suits your business best, consult a tax or legal expert. This expert can help you determine whether it's more beneficial for your business to take advantage of Section 179 or Bonus Depreciation. Generally, small businesses find Section 179 highly effective, while larger corporations may benefit more from Bonus Depreciation.
A tax professional can also confirm whether an asset qualifies for the Section 179 deduction. In order to be eligible, an asset must be tangible, purchased and used specifically for your business. A tax professional will know how to navigate tax regulations and laws and will understand deductions that might be confusing for individual taxpayers and business owners.
TAKE ADVANTAGE OF THIS OPPORTUNITY
Don’t let these tax saving opportunities slip away – time is running out to qualify to claim your Section 179 tax deduction for 2023. Act now to maximize your tax savings and give your business the boost it deserves. Contact Duncan-Parnell to get started.