What is Section 179 and How Does It Work?

Section 179 is a tax code that allows business owners to take an immediate expense deduction for purchases of depreciable business equipment rather than capitalizing and depreciating the asset. Essentially, it’s an incredible incentive that lets you purchase, finance or lease equipment throughout the year and receive a huge break on your tax burden.

Section 179 Explained

An incentive designed to help businesses grow with the purchase of new, innovative equipment.

Section 179 is a tax code that allows business owners to take an immediate expense deduction for purchases of depreciable business equipment rather than capitalizing and depreciating the asset. Essentially, it’s an incredible incentive that lets you purchase, finance or lease equipment throughout the year and receive a huge break on your tax burden. Sounds great, doesn’t it? This is particularly helpful for businesses that have old, outdated technology but aren’t quite ready to fork over a ton of money to upgrade.

How does it work?

If the piece of equipment is financed or purchased, you’re able to use the deduction, as long as the full amount of the purchase price is eligible. The deduction limit for this year is $1,000,000 – that’s right, a full MILLION dollars. This is a serious deduction that can put a lot of money back into your bottom line. There is a “total equipment purchased for the year” threshold of $2,500,000. Keep in mind, the equipment purchased or financed must be put into use by December 31, 2019 at midnight.

What type of equipment qualifies?

Section 179 is helpful because it’s aimed at general business equipment. However, you’re also able to purchase off-the-shelf software too. Here’s a more thorough list of what equipment will qualify:

  • Computers
  • Equipment, such as machinery, for business use
  • Business vehicles with a gross weight in excess of 6,000 lbs
  • Off-the-shelf software
  • Office furniture
  • Office equipment
  • Property for the building that’s not structural
  • And much more

As long as the equipment is purchased outright, financed or leased and within the deduction limit, you’re able to deduct it. This includes new or used equipment.

What outdated technologies should be replaced?

There are quite a few technologies businesses should replace before the deadline of December 31, 2019 at midnight. Nothing lasts forever, and when it comes to technology, it’s better to be safe than sorry. If you’re using outdated technologies, you’re leaving your data, and ultimately, your livelihood at risk. Cybercriminals can exploit outdated technologies much easier than newer, more current technologies. Here are the main technologies you should upgrade this year to take advantage of the deduction:

  1. Windows 7: Windows 7, the popular operating system, is reaching its end of support on January 14, 2020. This means there will no longer be security patches or bug fixes released. You can pay for up to three years of patches, but this isn’t cost-efficient or necessarily secure as cybercriminals will be learning and exploiting all of the vulnerabilities. In addition, your other software may become incompatible with the operating system.Take a look at your hardware and see if it’ll support an upgrade to Windows 10. You can take advantage of the tax deduction to purchase any hardware necessary. As an added bonus, newer computers tend to have longer battery life and greater security as technology has advanced quite a bit over the past couple of years.
  2. Windows Server 2008 R2: End-of-life mainstream support for Windows Server ended on January 13, 2015. Now, Microsoft will be ending support altogether on January 14, 2020. If you’re running Windows Server 2003 or you’re running hyper-V on a Windows Server 2008 R2 platform, it’s important to upgrade before it’s too late. Again, there will no longer be security patches or bug fixes released to keep the system safe against attacks.All three available editions of Windows Server 2008 R2 will be unsupported, including the following:
    • Datacenter
    • Enterprise
    • Standard

Still have questions about Section 179? Call our managed IT services team in Chicago at (630) 225-3284 or email us at info@osgusa.com.

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