As small business owners, you know everything counts, especially when reducing your tax burden. Before the year ends, you may want to take advantage of the Section 179 deduction of the Internal Revenue Service (IRS) to save a bit in the upcoming tax year. What is a Section 179 deduction, and how will it apply to your business in the 2024 tax season? Keep reading to learn more about this advantageous tax deduction.
What Is a Section 179 Deduction?
You’ll likely need equipment to help you run your business effectively if you run a company. If you operate a restaurant, you’ll likely need dishwashers and grills to help clean dishes and cook food. Likewise, if you run a landscaping business, you’ll likely need various equipment, including lawnmowers and a company vehicle, to conduct your business.
A Section 179 deduction from the IRS allows you to deduct eligible business equipment all at once within a single tax year. This deduction is specific, so you must consult your CPA or tax consultant regarding the best option for your business and whether your particular equipment qualifies. If the equipment should qualify, this is a significant tax break that you should consider taking advantage of this coming tax season.
How Section 179 Works?
Let’s suppose you own and operate a tree removal service and need to replace your wood-chipping machine. Although you may not need it until the spring when business picks up, purchasing it in late fall or early winter is a good idea because you can take advantage of the tax deduction in the upcoming tax season.
Section 179 deduction works by purchasing a qualifying new piece of equipment for your company and taking the deduction in one tax season instead of using a bonus depreciation over several tax seasons. Although many business expenses can be written off in the upcoming tax year, this deduction applies specifically to the equipment you plan to use for the business.
Keep in mind that you may or may not be able to deduct the entire cost of equipment because there may be limits on qualifying equipment. Before purchasing equipment for your business, it is a good idea to familiarize yourself with how much you can deduct.
What Does a Section 179 Tax Deduction Typically Cover?
Each year, a business can deduct a certain amount using the section 179 tax deduction. In 2024, the maximum deduction you can claim is $1,220,000.
Tangible property you can deduct typically includes the following types of items.
● Certain types of computer equipment, even if it is proprietary
● Film production equipment
● Specific vegetation or plant life
● Office furniture
● Machinery
● Specific vehicles
Several other products and improvements you make to your property may qualify for this deduction. Referring to the IRS website for details about the Section 179 deduction is a good idea.
What Will Section 179 Cover in the 2024 tax season?
Frequently Asked Questions
Can I write off pickup trucks or cargo vans I recently purchased for business purposes?
It depends. Many factors go into determining whether your business vehicles qualify and are eligible for the deduction, including gross vehicle weight rating, business use, and more. It should also be used more than 50 percent of the time for your business. Ideally, if you are considering purchasing equipment for your business and want to know if it will qualify for the upcoming year’s tax deduction, it is a good idea to consult your CPA.
If I purchase real estate for my business, does this count?
No. However, some things may be associated with the real estate that you own that you may qualify as eligible assets. For instance, if you replaced your roof this year, you may be eligible to write this off under Section 179. Or if you’ve installed a security system, this may also qualify. As mentioned, it is best to work with your CPA before making equipment purchases for your business to see if you will be eligible for this tax deduction in the upcoming tax year.
Keep in mind that tax rules may change each year. So, what was eligible in the previous year may not still qualify this year. Your CPA will know if any changes will occur in the upcoming tax year and will advise you accordingly.
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