Section 179 is a tax credit that was created to help with small and medium-sized businesses just like yours.
Section 179 is easy to understand, stimulates the economy, and promotes growth in small and medium-sized businesses. The benefits of this tax credit start with you and the business, but trickle down to your employees as well, from the savings you receive that can be put back into your business. Many different types of technology are eligible for this tax credit.
With Section 179, you will need to keep track of business-related purchases including:
Where you made the purchase
How it was acquired
And when it was placed in service
As with anything tax related, you must fill out the appropriate forms to get the credit. This means filling out form 4562 and attaching it to your 2017 tax return. The deductions, up to $510,000 for 2017, reduce your taxable income by the total amount claimed.
Taxable income cannot be reduced below zero – traditional depreciation write-offs may apply if your business is operating at a loss for the year; consult your tax professional.
Purchase amounts over $510,000 but up to $2,030,000 are eligible for reduced deductions. Within this guideline, there are rules for what equipment is allowed under Section 179. This equipment includes:
New equipment purchased or leased for business use
Tangible personal property used in business
Computers, printers, scanners, copiers, servers, switches, routers, WAPs, etc.
Software that is “off the shelf”, meaning software available to the public, not something written specifically for your business.
Office furniture and equipment, including items like a refrigerator.
Property attached to the building that is non-structural.
Partial business use items, based on the amount of time the item is used for business purposes, minimum 50% of the time.
Vehicles are included as well, with a few stipulations:
Business vehicles with a gross vehicle weight (GVW) of over 6,000 lbs.
Passenger vehicles with a GVW less than 6,000 lbs. that are used for business 50% of the time or greater carry a maximum deduction of $11,060 for cars, $11,160 for trucks or vans
Exceptions include vehicles specially designed or modified for transport of non-passengers or passengers for hire, such as vehicles with an enclosed driver’s compartment, permanent shelving, or non-personal use vehicles painted with the company name
Heavy SUVs or crossover passenger vehicles with a GVW of $6,000 lbs. may be eligible for deductions up to $25,000 if they meet extended criteria – contact your tax professional
Heavy non-SUV vehicles with a cargo area greater than 6-foot in length that is not easily accessible from the driver’s compartment and no seating behind the driver, or vehicles that seat more than nine passengers are eligible for the full deduction.
Is there anything that is not eligible? Unfortunately, yes, there is. The list is items that are acquired via in a manner other than an official bill of sale or legitimate means. This includes:
Equipment acquired from a business party or family
FMV Leased-out property
Or used equipment
Items must at least be purchased in the calendar year in which they are being claimed AND must be placed into service in the same calendar year. Any items that are for partial-use must be used for business more than 50% of the time, and deductions should be based on the percentage of time used for business purposes. If the amount of time an item is used for business changes, the deduction must be updated.
Additional deductions may be available for those in Empowerment Zones – speak with your tax professional to see if you are in one of these areas.
Section 179 is an important tax credit that anyone running a small to medium-sized business should know and understand. You’ll be giving yourself a leg up this tax season by using Section 179. If you purchased equipment this year, make sure that it is put into service before December 31st. Section 179 is only available to U.S. companies until the end of the year. But before taking any action, see your tax professional for more information.
Our experienced team can help determine what solutions are right for your business. Apex provides total support plans that encompass all of your information technology needs. Call us today at (800) 310-2739 or email firstname.lastname@example.org.
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