22 Dec Reasons Why You Should Be Using Section 179 to Your Advantage
For businesses looking to maximize their investments in equipment and software, understanding and utilizing Section 179 of the IRS tax code can be a game-changer. As a leading office equipment supplier, Arizona Business Equipment is committed to providing top-tier office solutions and empowering our clients with knowledge that can benefit their financial planning. Here, we explore what Section 179 is, how it works, and why businesses should use it to their advantage when purchasing office supplies.
What Is Section 179?
Section 179 of the IRS tax code is a provision that allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. This means that if you buy or lease a piece of qualifying equipment, you can deduct the full purchase price from your gross income. It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves.
How Does Section 179 Work?
Traditionally, when businesses purchase substantial equipment, they write it off a little at a time through depreciation. For instance, if you buy a piece of equipment for $50,000, you might write it off at $10,000 a year for five years. However, with Section 179, businesses can write off the entire equipment cost in the year of purchase. This limit is subject to inflation adjustment in future years. For example, in 2022, the maximum deduction was $1,080,000, up from $1,050,000 in 2023.
This upfront deduction can significantly lower the business’s taxable income for that year. It’s important to note that the equipment must be purchased or financed and put into service between January 1 and December 31 of the tax year you are claiming.
Examples of How Section 179 Works
Let’s say your business buys a new office printer and computer systems from Arizona Business Equipment for $30,000. Under Section 179, you can deduct the entire cost of this equipment from your gross income. If your taxable income was $100,000, it would now be $70,000, effectively reducing your tax bill for the year.
Leveraging Section 179 to Your Advantage
Businesses can use Section 179 to their advantage in several ways:
- Immediate Expense Deduction: Instead of gradually getting tax returns through depreciation, Section 179 allows for an immediate break, improving cash flow.
- Encourages Modernization: By allowing for an immediate deduction, Section 179 encourages businesses to update their equipment and software, keeping them competitive and efficient.
- Aids Financial Planning: Understanding how much you can save in a given year helps in better financial planning and budgeting for future investments.
- Flexibility in Purchasing: Knowing you can deduct the full price might affect your decisions about leasing or buying equipment.
Contact Arizona Business Equipment Today
Section 179 presents a valuable opportunity for businesses to invest in themselves while gaining significant tax benefits. As a company dedicated to providing the best in office equipment, Arizona Business Equipment urges all businesses to explore how they can use Section 179 to their advantage. If you’re looking to make the best of it and invest in a new printer, don’t hesitate to contact us today!