A business that finances qualifying equipment will still have the opportunity to take full advantage of the Section 179 tax deduction. Doing so is seen as a financial strategy to the bottom-line operations as this allows you to acquire equipment while making smaller payments, preserving much-needed cash flow.

While minimizing out-of-pocket expenses, the business can deduct the full amount of the equipment (and/or software) without paying the full cost in the year acquired. Deductions in this manner can actually allow you to save a higher amount in taxes because the total write-off can actually exceed the full-year payment amount for the equipment.

• Equipment & Machines Purchased For Business Use
• Personal Property Used In Business Operation
• Computers & Laptops
• Off-the-Shelf Software
• Office Furniture
• Large Property / Equipment Attached To Building (but not a structural component such as conveyor belts, printing press, large tools)

Qualifying equipment can also include items that are used for both personal and business operations. Section 179 deductions can only be taken if the equipment is used more than 50% of the time for business.

The Section 179 deduction program applies to new equipment, used equipment, and off-the-shelf software that is financed in the 2020 tax year. At this current time, a business can elect to write-off up to $1,000,000 if the qualifying equipment is placed into service by December 31, 2021.

Section 179 was created specifically for small and medium-sized businesses. Any businesses that purchase and/or finance less than $1,000,000 in qualifying equipment (new or used) during the 2020 tax year should qualify for the IRS Section 179 deduction. The tangible personal property and/or off-the-shelf software must be put into operation by December 31, 2021.

Bonus depreciation is another deduction (outside of Section 179) to deduct 100% of equipment in the first year of service. Any business can leverage the 100% bonus depreciation (in the year it’s put into service) that applies to new equipment only. However, bonus depreciation is not limited to your taxable income. You can deduct any amount of bonus depreciation, and if the deduction creates (or increases) a net operating loss, you can carry that amount back to offset the previous year’s income and also carry any unused loss forward to deduct against future income. Both Section 179 and Bonus Depreciation are available for leased equipment.

Taking advantage of the Section 179 deduction tax savings is not automatic through the IRS. A company must fill out form 4562 when filing taxes for the 2021 year, regardless if you are filing on time or through an extension. All Section 179 deductions are taken on an item-by-item basis, meaning you do not have to elect it on all qualifying equipment that was purchased and used in the 2021 tax year.