All businesses that purchase, lease or finance less than $2.5 million in business equipment generally qualify for the Section 179 Deduction. The deduction begins to phase out dollar for dollar for equipment purchases (or leases) more than $2.5 million. A business can deduct up to $1 million in the year the property is purchased, financed or leased and placed in service. The 100% bonus depreciation was also extended through 2022 and can be taken on qualifying equipment that exceeds the deduction limit. Generally, the Section 179 Deduction is taken first followed by the bonus depreciation.
You cannot claim this credit if you have claimed state tax credits for your equipment.
The Section 179 Deduction covers new and used equipment while the bonus depreciation covers only new equipment. The equipment must be for business purposes more than 50% of the time to qualify for Section 179 Deduction.
The US IRS has identified different areas as special zones that qualify for an increased Section 179 Deduction. These areas include the Liberty Zone and Empowerment Zone. The increased amount is $35,000 in addition to the $1 million limit.
Most tangible goods qualify for the Section 179 Deduction, including (but not limited to):
- Equipment (machines, etc) purchased for business use
- Tangible personal property used in business
- Business Vehicles with a gross vehicle weight in excess of 6,000 lbs
- Computer Software (off the shelf)
- Office Furniture
- Office Equipment
- Property attached to your building that is not a structural component of the building (e.g. a printing press, large manufacturing tools and equipment)
- Partial Business Use (equipment that is purchased for business use and personal use - generally, the deduction will be based on the percentage of time you use the equipment for business purposes.)
For more information, contact:
Taxpayer Assistance Center
New York, NY 10007
Phone: (212) 4361000