What is the IRS Tax Code Section 179?
Taxes are complicated . When it comes to small business management and tax codes on the Colorado Front Range you may be wondering how Section 179 can help you improve your cash flow so that you can keep more revenue in your register.
First, we recommend that you have work directly on the fine-print details with your tax accountant or financial advisors. The information in this blog is meant to help you have a stronger conversation.
Every business owner like you would like to keep as much revenue as possible, taking advantage of tax opportunities to reduce your taxes and to keep as much of your revenue in house as possible.
The Section 179 IRS tax code is defined as an immediate expense deduction that business owners can take for the depreciable business equipment instead of capitalizing and depreciating the asset over a period of time typically 5 years.
So, what is Sect 179 in layman’s terms…
Your purchase a piece of capital equipment, like a copier or printer, just like your automobile starts to depreciate immediately in value. The depreciated value is measured over the term of your lease/loan because in each year of the agreement the device is actually loosing value on the open market. Section 179 affords you the opportunity to write that portion of the depreciation off, offsetting any capital gains you may have made during the year with the deduction.
When you use the Section 179 tax code, your business realizes the depreciation of the equipment immediately. This means that you can offset the entire value of the device against this year’s capital gains. (read: more cash flow for your business today). It seems logical that most business owners would prefer to realize the deduction in this calendar year. Economies, especially this year, can be unpredictable and counting on unrealized money tomorrow isn’t necessarily the best way to manage your business.
You can use Section 179 to purchase or lease capital equipment that can be written-off on your 2022 tax return (up to $1,080,000).
What are the 2022 limits for Small Businesses Section 179 ?
- The total cap to the amount that your write off is $1,080,000 (2022).
- The limit to the total amount of equipment purchased is $2,700,000 (2022).
- The deduction phases out, dollar-for-dollar after $2,700,00 in spending and is totaled once your business reaches $3,780,000 in purchases.
Can I use the Section 179 code to purchase or lease copiers and printers?
Yes. You ] can use the deduction in conjunction with the purchase any new or used business equipment. In the business solutions space this means that you can take the opportunity to purchase or lease, new or used copiers, printers, some softwares, and even access control devices. This is just a few of the options (as seen by our friends at ABT).
- Production Printing Devices
- Access Control | Equipment & Software
- Smart Board and Collaborative Devices
- Managed IT Services | Equipment
- Cloud Communications | Phone equipment & Software
When is the Section 179 deadline?
Same day , every year. Everything that you intend to include must be in your possession by December 31sr. The equipment that you obtain must be used more than 50% of the time for business purposes in order to qualify. (Note: the equipment must be installed by December 31st, 2022. With the current supply chain issues surrounding the operating chips, toner, and devices you’ll want to place your orders as soon as possible.)
You’ll need to have your team multiply the cost of the equipment and/or the software by the percentage of business that you use to arrive at the monetary amount eligible for Section 179.
A tax calculator can help you math it out.
As always, if you have questions, you can feel free to reach out to our team in the chat or the form. We’d be happy to answer any questions you have but, may also refer you to your favorite tax wizard!