We are reaching the time of year where companies are working on budgets for the next fiscal year and determining what to do with their end of year dollars. During these uncertain times, living in a global pandemic, business owners know is more important than ever to spend their money wisely. That’s where Section 179 comes in.
What is Section 179?
Section 179 is a tax deduction each year, particularly attractive to business owners, from mom and pop stores to medium-sized companies. Instead of writing off equipment year after year through depreciation of the equipment, Section 179 allows business owners to write-off the entire purchase price of the qualifying equipment for the year they bought it. The deduction encourages these businesses to buy equipment and invest more into their own businesses. Win-win!
What is the Deduction for 2020?
The deduction limit for 2020 is $1,040,000, with a spending cap of $2,590,000.
What Qualifies for the Deduction?
Any business that purchases, rents (or leases) equipment during the 2020 tax year should qualify for the Section 179 deduction. You must put the equipment in service or finance it during the 2020 tax year. For more specific qualifications, visit www.Section179.org.
What are the limitations of Section 179?
There are a few limitations that come with the deduction. For example, there are caps to the total amount written off ($1,040,000 for 2020), and limits to the total amount of the equipment purchased ($2,590,000 in 2020). The deduction begins to phase out on a dollar-for-dollar basis after a given business spends $2,590,000. Thus, the entire deduction goes away once $3,630,000 in purchases is reached. This makes it a true small and medium-sized business deduction.
What about Bonus Depreciation?
Bonus depreciation is available some years, and sometimes it is not. For 2020, it is offered at 100%. Bonus depreciation typically takes effect after a business reaches the Section 179 spending cap. It’s also available for both new and used equipment.
At Custom Truck One Source, we are always letting our customers know the benefits of taking advantage of Section 179. Contact us today to get your new or used equipment in service before December 31, 2020. If you have any further questions, visit www.Section179.org.