Hurst Farm Supply Blog

How To Utilize a Section 179 Tax Deduction

Posted by Hurst Farm Supply on Dec 11, 2018 9:00:00 AM

How to Utilize a Section 179 Tax Deduction

What is a Section 179 Deduction?

It may sound like some confusing tax jargon, but it’s actually far from it! Section 179 was drafted with businesses in mind and is designed to encourage businesses of all sizes to invest in themselves. Whether it’s tools, machinery, vehicles, or software, businesses never stop needing new equipment.

Instead of depreciating an asset over a long period of time, the Section 179 Deduction allows businesses to deduct the full purchase price of pieces of equipment and off-the-shelf software that qualify, putting hard-earned dollars back into the pockets of farmers everywhere.

Though it is typically dependent on the tax year in question, Section 179 currently has a maximum deduction of $1 million dollars for 2018. However, there is a dollar for dollar phase out if a company purchases over $2.5 million dollars in equipment.

In addition to the Section 179 deduction, qualified recipients are eligible for 100% bonus depreciation under Section 168 for 2018. Section 179 is usually calculated first and followed by bonus depreciation.

Questions about your specific tax situation? Contact your CPA today!

What Qualifies?

In most cases, almost all types of business equipment will qualify for this deduction. Here are a few examples of material goods that generally qualify.

  • Equipment (machines) purchased for business use

  • Tangible personal property used in business

  • Business vehicles with a gross vehicle weight in excess of 6,000 lbs.

  • Computers

  • Off-the-shelf computer software

  • Office furniture

  • Property attached to your building that is not a structural component of the building (i.e. large manufacturing tools or equipment)

  • Certain improvements to existing non-residential buildings (i.e. fire suppression, alarms and security systems, HVAC, and roofing)

Section 179 has been known to go through changes with little to no notice, so it’s important to act fast in order to leverage the best savings this tax year!

How to Qualify

In order for your equipment to qualify, it must be tangible and purchased (or leased) and put into service between January 1st and December 31st of the current tax year.

Using the Section 179 Deduction when leasing or financing new equipment is one of the greatest ways to get the most back on your investment. This is due to the fact that you can actually deduct the full amount of the equipment and/or software during the tax year.

In many cases, the amount that you can save in taxes by combining an Equipment Lease or Equipment Finance Agreement with a full Section 179 deduction can exceed the payments, making this a very bottom line-friendly option for farmers. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income.

Section 179 Deduction Calculator

Curious about how much you can save this tax year? This easy-to-use deduction calculator takes away the guesswork and makes saving easier than ever. Head over and try it for yourself!

When our customers succeed, we succeed. That’s why, at Hurst Farm Supply, we want to do everything we can to make sure that you get the most out of your hard-earned investment, and that you have access to all of the tools that are available to you. Interested in a new tax-deductible compact utility tractor? Head to our website to take our one-of-a-kind Deere Hunter Quiz to begin the search for your perfect product today!

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Topics: Cotton Farming