Section 179 Deduction- Act Now For Tax Savings

Photo:www.section179.org

Nov 15, 2010 – Effective as of 09/27/2010, H.R. 5297 (the Small Business Jobs and Credit Act of 2010) had a substantial (and welcome) impact on Section 179.  The biggest impact is that it increased Section 179’s limits (almost doubling them). This will mean a substantial boost to your bottom line this year.  But to get the deduction for tax year 2010, you have to act now, as once the clock strikes midnight on 12/31/2010, Section 179 can’t affect your 2010 profits anymore.

Additionally, a “$179 bonus per $10,000 financed” is being offered thru 12/31/2010.  This means you can get your equipment, vehicles, and/or software now (and thus get to take advantage of Section 179 in 2010), and get bonus cash as well.

Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It’s an incentive created by the U.S. Government to encourage businesses to buy equipment and invest in themselves. It is sometimes referred to as the “SUV Tax Loophole” or the “Hummer Deduction” because many businesses have used this tax code to purchase qualifying vehicles (like SUV’s and Hummers.)

Essentially, Section 179 works like this:

When your business buys certain pieces of equipment, it typically gets to write them off a little at a time through depreciation. In other words, if your company spends $50,000 on a vehicle, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example.)

Now, while it’s true that this is better than no write off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it.

In fact, if a business could write off the entire amount, they might add more equipment this year instead of waiting. That’s the whole purpose behind Section 179… to motivate the American economy (and your business) to move in a positive direction. For most small businesses (adding total equipment, software, and vehicles totaling less than $500,000 in 2010), the entire cost can be written-off on the 2010 tax return.

For more information on Section 179 visit www.section179.org/, also available on the site is a calculator.

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