The Section 179 deduction is a powerful tax-reducing tool that business owners can use and the new tax reform law passed this year made this deduction rule permanent. It used to be that tangible asset purchases like computers and machinery had to be written off over a number of years using a depreciation deduction. Section 179 allows you to take up to $510,000 (2017 inflation adjusted amount) in qualified business asset purchases in the same year of purchase and placing into service
Not all investments in your business will be eligible, but furniture and fixtures, new and used office equipment, computers (including tablets, printers, and peripherals), off-the-shelf software, SUVs weighing 14,000 pounds or less (maximum $25,000) and machinery are all eligible
Even though you can deduct the entire cost of a new computer or machine, the date it’s placed into service is when your deduction begins.
Strong record-keeping is important to any tax filing season, but there is a higher record-keeping burden for Section 179 and other depreciable assets compared to day-to-day operating expenses. You need to show how you acquired the equipment, who you bought it from, the cost, delivery date, and the date placed in service.
Planning in advance is a very important part of getting the most out of Section 179. Review whether your business is expected to have a loss or profit by year-end and work with your CPA to see how you can work the $510,000 cap and carryover to your advantage.
