Section 179 is an election to expense certain depreciable business assets for businesses that purchase qualifying property, allowing businesses to deduct the cost of the property (in one year) rather than depreciating it over time (numerous years). This deduction is often referred to as the Section 179 deduction under the Internal Revenue Service (IRS) . For more information, please reference the IRS publication “How to Depreciate Property”, Section 179 Deduction.
Below is a short-list of considerations for Section 179, with links to a publication provided by the IRS. As a courtesy, we have also included links to other external sources to assist with information regarding Section 179, purchasing/leasing equipment, and financing.
Key points about Section 179:
- What is Depreciation? Depreciation is an annual income tax deduction that allows you to recover the cost or other basis of certain property over the time you use the property. It is an allowance for the wear and tear, deterioration, or obsolescence of the property.
- What is Section 179? Section 179 allows businesses to deduct the full cost of qualifying property in the year it is placed in service, rather than depreciating it over several years, providing a call flow advantage. The property must be used for business purposes more than 50% of the time to qualify for the Section 179 deduction.
- Eligible Property: Typically, property used in the active conduct of a trade or business. Most types of tangible property (except land), such as buildings, machinery, vehicles, furniture, and equipment. You can also depreciate certain intangible property, such as patents, copyrights, and computer software. (See What Property Can Be Depreciated?)
- Deduction Limit: There is a limit on the total amount of the Section 179 deduction that a taxpayer can claim in a given tax year. The deduction limit is set by the IRS and may be subject to change. It’s important to check the current limits for the tax year in question. For tax years beginning in 2023, the maximum section 179 expense deduction is $1,160,000. (See What are the Deduction Dollar Limits for 2023?)
- Can I Electrify my Current Fleet Under Section 1479: The cost associated with converting your current Internal Combustion Engine (ICE) to an Electric Vehicle (EV), may qualify. However, as part of the consideration, it is always important to talk to an experienced and licensed Certified Public Accountant (CPA) and/or Tax Professional to ensure your equipment/property qualify for Section 179.
It’s important to note that tax laws can change, and it’s advisable to consult with a tax professional or refer to the IRS for clarification on Section 179 and other tax regulations. For the latest information about developments related to Section 179, please visit: “About Publication 946, How to Depreciate Property”.
* Publication 946, Cat. No. 13081F, “How To Depreciate Property”, Section 179 Deduction, Department of the Treasury Internal Revenue Service