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Section 179 Business Quick Facts

Businesses can utilize Section 179 by taking advantage of the tax benefits it offers for certain types of property used for business purposes.

About Section 179

Section 179 refers to a section of the United States Internal Revenue Code that allows businesses to deduct the cost of certain types of property as an expense in the year the property is placed in service, rather than depreciating it over several years. This section is often used to encourage business investment in capital assets.

The Section 179 deduction is typically associated with tangible personal property, such as machinery, equipment, furniture, and certain vehicles, that is used for business purposes. It's important to note that not all types of property qualify for the Section 179 deduction, and there are specific limitations and rules that businesses must follow.

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The deduction limit and the types of property that qualify can vary from year to year based on changes in tax laws. Businesses should consult with a tax professional or the IRS for the most up-to-date information on Section 179 and its implications for their specific situation. Beginning on January 1, 2023, bonus depreciation has begun to phase out over the next four years, as follows:

  • 2023 (1/1/23 – 12/31/23) – 80% bonus depreciation allowed
  • 2024 (1/1/24 – 12/31/24) – 60% bonus depreciation allowed
  • 2025 (1/1/25 – 12/31/25) – 40% bonus depreciation allowed
  • 2026 (1/1/26 – 12/31/26) – 20% bonus depreciation allowed

Without any new legislation, bonus depreciation will be completely phased out starting on January 1, 2027.
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1. Lease, Finance, or Purchase Qualifying Office Equipment
Ensure that the office equipment you plan to purchase qualifies for Section 179.

2. Ensure Business Use
Confirm that the office equipment is used more than 50% of the time for business purposes.

3. Place the Equipment in Service
The office equipment must be placed in service during the tax year in which you want to claim the Section 179 deduction. Placing in service generally means the equipment is ready and available for use in your business.

4. Calculate the Deduction
Determine the total cost of the qualifying office equipment. For the tax year, check the maximum deduction limit.

4. Prepare Tax Forms
When filing your business tax return, report the Section 179 deduction on the appropriate tax forms. This often involves completing Form 4562, "Depreciation and Amortization."

5. Consult with a Tax Professional
Given the complexity of tax laws and potential changes, it's advisable to consult with a tax professional or accountant. They can provide guidance specific to your business situation, help ensure compliance, and maximize your tax benefits.

Don't worry, if you missed it this year then make
sure to take advantage next year.

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