What is the IRS Section 179 Deduction?
Increasing efficiency and better company morale are 2 highly desired benefits of buying new equipment or upgrading your existing equipment for 2022
Here's what to know for 2022
Hidden IRS Tax Benefit: The lesser known Section 179 tax benefit
allows you to write off the entire spend on new IT equipment and other capital expenditures in this tax year (rather than depreciate over a few years).
To qualify you must make the purchase and put it into service by the end of the day on December 31, 2022.
- 2022 Deduction Limit = $1,080,000
This deduction is good on new and used equipment, as well as off-the-shelf software. To take the deduction for tax year 2022, the equipment must be financed or purchased and put into service between January 1, 2022 and the end of the day on December 31, 2022.
- 2022 Spending Cap on equipment purchases = $2,700,000
This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced on a dollar for dollar basis. This spending cap makes Section 179 a true “small business tax incentive” (because larger businesses that spend more than $3.5 million on equipment won’t get the deduction.)
- Bonus Depreciation: remains at 100% for 2022
Bonus Depreciation is generally taken after the Section 179 Spending Cap is reached. The Bonus Depreciation is available for both new and used equipment.
Use the 2022 Calculator on Section 179.org's page
to find out how much you can save.
Always feel free to reach out to your Fulcrum Group Fractional CIO for more details.
Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves.
Today, Section 179 is one of the few incentives included in any of the recent Stimulus Bills that actually helps small businesses. Although large businesses also benefit from Section 179 or Bonus Depreciation, the original target of this legislation was much needed tax relief for small businesses – and millions of small businesses are actually taking action and getting real benefits.
Essentially, it works like this:
When your business buys certain items of equipment, it typically gets to write them off a little at a time through depreciation. In other words, if your company spends $50,000 on a machine, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example). Now, while it’s true that this is better than no write-off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it.
In fact, if a business could write off the entire amount, they might add more equipment this year instead of waiting over the next few years.
That’s the whole purpose behind Section 179 – to motivate the American economy (and your business) to move in a positive direction.
, for Fulcrum Group’s financing options and leasing application.
Some key projects we’re seeing people take advantage of right now, include:
- VOIP Phone Systems
- Virtual Server Implementations (Servers, Storage)
- Data Center Build Outs
- Network Switching and WiFi Upgrades
- New computers for staff (improve staff performance AND morale)
Take a look at some of the recent solutions we’ve put in place and consider the impact they could have in your own organization:
- Remote Access Solutions
- Other Cloud Solutions for Small/Med businesses
- Unified Communication – office phone system solutions
Want to know what your tax savings could be? Visit our updated Section 179 Tax Savings Calculator
. We aren’t tax professionals, so please consult your tax professional prior to making any decision.
Fill out the form below and we’ll have a Fulcrum Group Account Manager reach out to you immediately to discuss how an end of year technology purchase could benefit you.