What Business Property Qualifies for Section 179 Deduction?
Section 179 is a federal tax code that was created to make purchasing equipment financially attractive to businesses. The Section 179 Deduction code allows businesses to deduct the costs of equipment that is purchased outright, financed or leased. The focus of this law is aimed at general business equipment as well as off-the-self software, but the majority of business equipment purchases will qualify including machinery, computers, software, office furniture, vehicles, and other tangible goods.
The Stimulus Acts of 2008, 2009, 2010 and the American Taxpayer Relief Act of 2013 have all enhanced this section of the federal tax code. By deducting the full cost of equipment you purchase for your business, you lower your operating costs substantially. And, if you lease or finance your equipment and/or software, your savings can be further expanded by being able to take the full deduction in the year of purchase and spreading the payments out for a number of years.
What Property Qualifies for Section 179 Deduction?
To qualify for the Section 179 Deduction, the equipment listed below must be both purchased and put into use between January 1, 2013, and December 31, 2013.
- Equipment (machines, etc) purchased for business use
- Tangible personal property used in business
- Business Vehicles with a gross vehicle weight in excess of 6,000 lbs*
- Computer “Off-the-Shelf” Software (not custom designed – available to the general public)
- Office Furniture
- Office Equipment
- Property attached to your building that is not a structural component of the building (i.e.: a printing press, large manufacturing tools and equipment)
- Partial Business Use (equipment that is purchased for business use and personal use: generally, your deduction will be based on the percentage of time you use the equipment for business purposes).
What Property Does Not Qualify for Section 179 Deduction?
Most property will qualify for the deduction, but there are some exceptions including the following:
- Real Property does not qualify for the Section 179 Deduction. Real Property is typically defined as land, buildings, permanent structures and the components of the permanent structures (including improvements). Other examples of property that would not qualify for the Section 179 Deduction include paved parking areas and fences.
- Air conditioning and heating equipment is generally not eligible for the Section 179 Deduction.
- Property used outside the United States generally does not qualify for the Section 179 Deduction.
- Property that is used to furnish lodging is generally not qualified for the Section 179 Deduction.
- Property acquired by gift or inheritance, as well as property purchased from related parties does not qualify for the Section 179 Deduction (No, you can’t sell equipment to yourself and qualify for Section 179).
- Any property that is not considered to be personal property, may not qualify for the Section 179 Deduction.
- Used Equipment (that is new to you) qualifies for Section 179, however used equipment does not qualify for Bonus Depreciation.
This information has been provided as a general overview of Section 179. If you have any questions on how this may benefit your business, please contact Bressler & Company at 559-924-1225.
* Vehicles used in your business qualify – but certain passenger vehicles have a total depreciation deduction limitation of $11,060, while other vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes qualify for full Section 179 deduction. See full policy statement at IRS.gov.
(Note: The general content for this blog was taken from the website: section179.org)