If you own a small business, you understand the value of being smart with your finances, particularly when it comes to searching for qualifying tax breaks. If you’re not familiar with Section 179 of the tax code, then you could be missing out on some major benefits for your business. Section 179 essentially allows businesses to deduct the full purchase price of qualifying equipment, software or property from their gross income for that year. The intent behind this tax code is to grow the American economy in a positive direction and encourage small business owners to invest in their businesses.

In 2017, the maximum deduction allowed by businesses was $510,000, however, the new tax legislation signed into law in December has increased that deduction amount to $1,000,000. A condition to qualify for the full deduction is that your business must spend less than $2,500,000 total on equipment during the tax year, which means this code truly is designed for small to mid-sized businesses. If you spend over that amount, the deduction decreases dollar for dollar over that phase out number.

Another major requirement under Section 179 is that the equipment, property or software must be used for business purposes more than 50% of the time. How do I know if my business qualifies? As long as you purchased less than $2.5 million in property or equipment, then you qualify.

What sort of items are eligible under Section 179? Commonly known write-offs include items such as office furniture, office equipment (printers, computers, etc.), machinery intended for business use and vehicles whose primary use is for business purposes (visit the Section 179 Business Vehicle Section for restrictions).

Other, lesser known qualifications include property attached to your office that is not structural (i.e. large manufacturing tools/equipment), some improvements to the interior of nonresidential or retail buildings (including items such as an HVAC or alarm system), and “off-the-shelf” computer software. “Off-the-shelf” software is defined as one that is not custom designed and is readily available to the general public to be used for the purpose of improving or growing your business.

Section 179 fluctuates yearly depending on inflation and the latest tax code, so if you are unsure what items may be eligible from your 2017 tax year, or think some items may qualify as partial business use items, please contact our office for more information. One of our accountants would be happy to help you determine what expenses are eligible, as well as discuss future purchasing goals to help your business receive the maximum benefits.