What is Section 179?

With the year’s end rapidly approaching, now is the right time to plan for taking advantage of the Section 179 tax deduction, which allows our customers with their own landscaping, construction, and agricultural businesses to benefit from tax incentives while investing in business assets.

Through the Section 179 tax deduction, business owners are able to write off up to 80% of the purchase price of qualifying new and used equipment in the year of its purchase. This year, the incentive is applicable to new equipment that is financed or purchased between Jan. 1, 2023 and Dec. 31, 2023, and put into use by the end of day on Dec. 31, 2023.

If you’re considering utilizing the Section 179 tax deduction, 2023 may be the best year to buy as bonus depreciation is expected to decline in the following years. While this year’s maximum depreciation is 80%, this number is expected to drop to 60% in 2024.

The 2023 guidelines allow expenses up to $1,160,000 to be written off on a maximum equipment expense of $2,700,000. This means that asset expenses over $2,890,000 will begin to phase out dollar-for-dollar. To allow small to medium-sized businesses to benefit the most from this incentive, businesses with purchases totaling over $4,050,000 are not applicable for a deduction.

Who qualifies for a deduction?

All businesses purchasing, financing, or leasing new equipment for business use during the 2022 tax year should qualify for the Section 179 deduction (so long as their total purchases are under $4,050,000).  Additionally, equipment and software must be used for business purposes over 50% of the time to qualify for a Section 179 deduction. Your monetary amount of eligibility is found by multiplying the cost of equipment by the business-use percentage.

Here is an example of Section 179 at work during the 2023 tax year: