Section 179 Deduction & Qualified Leasing

Jan 16, 2020 – The Section 179 deduction for 2020 is $1,040,000 dollars. This means U.S. companies can deduct the full price of qualified equipment purchases, up to $1,040,000, with a “total equipment purchase” limit of $2,590,000. In addition, businesses can take advantage of 100% bonus depreciation on both new and used equipment for the entirety of 2020. For most small businesses, the entire cost of qualifying equipment can be written-off on the 2020 tax return (up to $1,040,000).

Limits of Section 179

Section 179 does come with limits – there are caps to the total amount written off ($1,040,000 for 2020), and limits to the total amount of the equipment purchased ($2,590,000 in 2020). The deduction begins to phase out on a dollar-for-dollar basis after $2,590,000 is spent by a given business (thus, the entire deduction goes away once $3,630,000 in purchases is reached), so this makes it a true small and medium-sized business deduction.

 

Example from Crest Capital*:

Equipment Purchase: $1,150,000
First Year Write-Off:  $1,000,000
100% Bonus First Year Depreciation: $150,000
Normal First Year Depreciation: $0
Total First Year Deduction: $1,150,000
Cash Savings: $402,500
———————————
Equipment Cost After Tax: $747,500

*For demonstrative purposes only.

Section 179 Qualified Financing and Leasing

Section179.org encourages the use of Section 179 Qualified Financing for all business equipment purchases. The advantage to leasing or financing equipment and then taking the Section 179 Deduction is the fact that you can deduct the full amount of the equipment, without paying the full amount this year. The amount you save in taxes may exceed the payments, making this a very bottom-line friendly deduction.