Section 179
An IRS tax code provision allowing businesses to immediately deduct the full cost of qualifying equipment and property in the year it's purchased rather than depreciating it over time.
Example
“The small business used Section 179 to immediately deduct the full $50,000 cost of new machinery rather than depreciating it over 7 years.”
Memory Tip
SECTION 179 = deduct it ALL NOW instead of over years. Powerful tax break for business equipment.
Why It Matters
Section 179 can significantly reduce a small business owner's tax burden in the year of purchase, improving cash flow and making it easier to invest in necessary equipment without spreading the deduction across multiple years. This provision makes upgrading machinery, vehicles, or technology more affordable since you get the full tax benefit immediately.
Common Misconception
Many people believe Section 179 applies to all business purchases, but it actually has limits on the total amount you can deduct per year and excludes certain assets like real estate and land. Additionally, the business must have enough taxable income to benefit from the deduction, so it does not help all companies equally.
In Practice
A landscaping company purchases a new truck for $35,000 in 2024. Using Section 179, they can deduct the full $35,000 from their 2024 business taxes instead of deducting about $3,500 per year over ten years through depreciation. If the company has a 25 percent tax rate, this saves them approximately $8,750 in taxes immediately rather than spreading smaller savings across a decade.
Etymology
Named after Section 179 of the Internal Revenue Code. Allows immediate EXPENSING of business assets.
Common Misspellings
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See Also
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