An extraordinary tax reduction opportunity, section 179, is yet again available for American businesses, and more specifically, small businesses.<\/p>\n
Every year the US Congress approves section 179 of the IRS Tax code which provides a significant business tax deduction.<\/p>\n
In one sentence — Rather than depreciating the acquisition cost of business equipment (be it new, used or leased) over several years or the useful life, the entire cost can be deducted in the year purchased.<\/p>\n
The entire cost can be deducted in the same year of purchase.<\/p>\n
[1] The deduction limit in 2016 is $500,000.<\/p>\n
[2] The equipment must be acquired and put into service in the same calendar year the deduction is taken.<\/p>\n
[3] Vehicles can qualify, and so can equipment that is used \u201cpartially\u201d for business.<\/p>\n
[4] There is a \u201cspending cap\u201d after which the amount of the deduction begins to be reduced. In 2016 this cap is $2,000,000.<\/p>\n
[5] \u201cBonus depreciation\u201d can be used when the \u201cspending cap\u201d is exceeded. Check with your tax adviser or the section 179 website for more insight into this tax accounting tactic.<\/p>\n
[6] Section 179 was added to the tax code in 2008 and it might be around for a while longer. The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) has set this $500,000 limit as the annual standard. Prior to this act, the amount was subject to congressional approval each year and businesses were unable to plan.<\/p>\n