Section 179 Federal Income Tax Deduction: $1,040,000 Write-Off
This deduction is good on new and used equipment, as well as off-the-shelf software. To take the deduction for tax year 2020, the equipment must be financed/purchased and put into service between January 1, 2020 and the end of the day on December 31, 2020.
2020 Spending Cap on Equipment Purchases = $2,590,000
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 $3.63 million on equipment won’t get the deduction.)
100% Bonus Depreciation
In addition to the $1,040,000 write-off, companies can take 100% bonus depreciation on the adjusted basis of their qualified equipment purchased in 2020. Equipment must be purchased and placed into service on or before December 31, 2020.
When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation – unless the business had no taxable profit, because the unprofitable business is allowed to carry the loss forward to future years.
The above is an overall, “simplified” view of the Section 179 Deduction for 2020. For more details on limits and qualifying equipment, as well as Section 179 Qualified Financing, please read the entire Section 179 website carefully.
Now is the time to invest in new equipment! Always check with your accountant to confirm eligibility for tax benefits.