Known as the Section 179 deduction, the tax provision allows qualifying capital items to be written off immediately on a business’s taxes! That has the effect of lowering a business’s taxable profits, sometimes significantly.
Essentially, Section 179 works like this:
When your business buys certain types of equipment, typically it is written 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.
Please keep in mind that to qualify for the Section 179 Deduction, the equipment listed below must be purchased and put into use between January 1 and December 31 of the tax year you are claiming.
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 most small businesses, the entire cost can be written off on the 2016 tax return (up to $500,000).