What is Section 179?
Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment 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. Section 179 provides an incentive created by the U.S. government to encourage businesses to buy equipment and invest in their future.
2022 Deduction Limit = $1,080,000
This deduction is good on new and used equipment, meaning that businesses can deduct the full cost of equipment for their 2020 taxes, up to $1,080,000. This can have a significant effect on a company’s bottom line. To take advantage of these Tax Incentives, the equipment must be financed/purchased and put into service by the end of the day, 12/31/2022.
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 $3,670,000 on equipment won’t get the deduction.)
Bonus Depreciation: Also Available in 2022
100% Bonus Depreciation is also available in 2022 for both New and Used Equipment. The Bonus Depreciation is most useful to businesses spending in excess of the Section 179 Cap, ($2,700,000 in 2022.)