IRS Sec. 179 Deduction - The Greatest  Year End Closing Tool Ever!

Are you up to speed on the IRS Sec. 179 deduction for equipment purchases? If not, YOU NEED TO BE. With the end of year approaching, you should be discussing this HUGE SELLING TOOL - the tax savings benefit from the Sec. 179 deduction.  

 

With the IRS Sec. 179 regulation a customer can purchase up to $500,000 and write off 100% of it in the current tax year instead of depreciating it over 3-7 years.  And with Cisco Capital, they can finance or lease the purchase, making for a net positive cash flow transaction the first year.  Want to know more?  Read on...

 


What is the Section 179 Deduction?

 

Most people think the Section 179 deduction is some arcane or complicated tax code. It really isn't, as the following will show you. Essentially, Section 179 of the IRS tax code allows businesses to deduct on their CURRENT YEAR TAXES the full purchase price of qualifying equipment and/or software 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 and lower your tax bill.  It's an incentive created by the U.S. Government to encourage businesses to buy equipment and invest in themselves. 

 

Essentially, Section 179 works like this: When your business buys certain items 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 machine, 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 over the next few years. That's the whole purpose behind Section 179 - to motivate the American economy (and your business) to move in a positive direction.  Learn more at:  http://www.section179.org/section_179_deduction.html

 

The following example will help you understand:
 

Purchase Cost of Equipment, Vehicles, and/or Software: $650,000
Section 179 Deduction: $500,000
50% Bonus Depreciation Deduction: (on remaining amount above $500,000) $75,000
Normal 1st Year Depreciation: $15,000
Total First Year Deduction: $590,000
Cash Savings on your Purchase: (assuming a 35% tax bracket) ($206,500)
Lowered Cost of Equipment, Vehicles, and/or Software after Tax Savings: $443,500

With the IRS Sec. 179 regulation a customer can purchase up to $500,000 and write off 100% of it in the current tax year instead of depreciating it over 3-7 years. And with Cisco Capital, they can finance the purchase, making for a net positive cash flow transaction the first year! 

But don't wait!  In 2014, the total Section 179 allowable deduction will be reduced from $500,000 to only $25,000 so if you are looking to make a capital purchase within the next year, DO IT NOW.
Resources: 
Information excerpted from:  http://www.section179.org/
Try the Section 179 Savings Calculator
More reading:  What Every Business Owner Needs to Know

 

IMPORTANT:  Please consult your tax advisor to determine the tax ramifications of acquiring equipment or software for your business.