What is 'Section 179'

Section 179 is an immediate expense deduction that business owners can take for purchases of depreciable business equipment instead of capitalizing and depreciating the asset. The Section 179 deduction can be taken if the piece of equipment is purchased or financed and the full amount of the purchase price is eligible for the deduction. Taking the cost of the equipment as an immediate expense deduction allows the business to get an immediate break on their tax burden whereas capitalizing then depreciating the asset allows for smaller deductions to be taken over a longer period of time. The Section 179 expensing method is offered as an incentive for small business owners to grow their businesses with the purchase of new equipment.

BREAKING DOWN 'Section 179'

The Section 179 expense deduction is limited to such items as cars, office equipment, business machinery and computers. This speedy deduction can provide substantial tax relief for business owners who are purchasing startup equipment. The equipment must qualify for the deduction per the specifications within Section 179 of the tax code and the purchase price must be within the dollar amount ranges allowable by the code. The property must be placed in service during the tax year for which the deduction is being claimed. Equipment covered by the Section 179 deduction might also qualify for bonus depreciation, which further reduces the business owner's tax bill.

The maximum amount you can elect to deduct for most section 179 property you placed in service in tax years beginning in 2016 is $500,000 ($535,000 for qualified enterprise zone property), according to the Internal Revenue Service. This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $2,010,000.

RELATED TERMS
  1. Deductible

    For taxes, a deductible is the expenses subtracted from adjusted ...
  2. Property Tax Deduction

    Property tax deduction refers to state and local property taxes ...
  3. Section 1245

    Section 1245 is a tax law codified in the Internal Revenue Code ...
  4. Section 1231 Property

    Section 1231 property is a tax term relating to depreciable business ...
  5. Business Interest Expense

    Business interest expense is the cost of interest that is charged ...
  6. Tax Deductible Interest

    The tax deductible interest is a borrowing expense that a taxpayer ...
Related Articles
  1. Taxes

    Why You Should Itemize Your Tax Deductions

    This strategy of moving your tax deductable payments and donations to the following year could mean hundreds more on your return.
  2. Taxes

    Making Sense of the 2017 Tax Changes

    Here is a brief overview of some of the changes introduced by the Tax Cuts and Jobs Act of 2017, and how they may affect your taxes.
  3. Taxes

    15 Tax Deductions & Benefits for the Self-Employed

    Running your own business has both personal and financial perks.
  4. Taxes

    The Most Overlooked Tax Deductions

    The receipts you cram into your wallet could be replaced with cash come tax season.
  5. Personal Finance

    11 Tax Deductions You Can't Actually Write Off

    These are some of the most common tax write-offs that you can't really claim.
  6. Taxes

    5 Overlooked Tax Deductions for Small Businesses

    It's easy for small business owners to miss a few tax write-offs. Here's where to find them.
  7. Taxes

    Trump's Paradox: Real Estate CEOs Brace for Change

    Real estate industry executives are expressing fears over Trump carrying out radical tax reform.
  8. Financial Advisor

    20 Medical Expenses You Didn't Know You Could Deduct

    These commonly overlooked medical tax deductions could lower your tax bill, especially since medical expenses need to be only 7.5% of your AGI in 2018.
  9. Taxes

    7 Expenses You Won't Believe Are Deductible

    Many taxpayers would be surprised to discover some of the things that qualify as legitimate deductions.
RELATED FAQS
  1. Which is better for tax deductions, itemization or a standard deduction?

    Each deduction that you claim may result in a decrease in the amount of taxes that you owe. However, whether you receive ... Read Answer >>
Trading Center