Section 179 Deduction & Qualified Leasing
Jan 8, 2021 – The Section 179 deduction for 2021 is $1,050,000 dollars. This means U.S. companies can deduct the full price of qualified equipment purchases, up to $1,050,000, with a “total equipment purchase” limit of $2,620,000. 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 ($1,050,000 for 2021), and limits to the total amount of the equipment purchased ($2,620,000 in 2020). The deduction begins to phase out on a dollar-for-dollar basis after $2,620,000 is spent by a given business (thus, the entire deduction goes away once $3,670,000 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.