Section 179 Tax Deduction Calculator

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Section 179 Tax Deduction calculator an easy to use calculator to estimate your tax savings on equipment purchase through section 179 deduction in 2019 and tax year 2018. As you know, for small business tax payers, the section 179 deduction   has a real impact on your equipment costs.

Section 179 Deduction Calculator with Bonus Depreciation

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What is Section 179 Deduction?

Section 179 of the Internal Revenue Code allows deduction of the full purchase price of qualifying machinery and/or software purchased or financed during the tax year from gross income.This is beneficial to business owners because , then your taxable income gets reduced substantially in the year of purchase of equipment, machinery or softwares. This is contrary to the general rule of deducting depreciation on the purchase of machinery or equipment over a period of years. So , in the year of purchase , you can deduct only a portion of the cost.For example ,let me give a hypothetical example.If your company spends $30,000 on a machine, it gets to write off (say) $6,000 a year for five years . But under section 179 . now you can write off the entire cost of qualifying equipment on the 2020 tax return up to maximum investments allowed $1,040,000.This reduces your business income in the year of purchase of equipment itself.

What are the limits of section 179 deduction?

Following are the limitations for the claim of deduction u/s 179 of the IRC.

  1. The total amount that can be written off in Year 2020 can not be more than $1,040,000 .
  2. There is also a limit to the total amount of the equipment purchased in one year i.e $2,590,000 in year 2020. 
  3. The phase-out of section 179 deduction begins at  $2,590,000 completely ends once the limit of $3,630,000 in equipment purchases is reached.
  4. the equipment and/or software purchased or financed must be placed into service between January 1, 2020 and December 31, 2020.
  5. The equipment, vehicle(s), and/or software must be used for business purposes more than 50% of the time to qualify for the Section 179 Deduction.

What type of purchases qualify for section 179 deduction?

To qualify for the section 179 deduction, your property must be one of the following types of depreciable property.

  1. Tangible personal property.
  2. Other tangible property (except buildings and their structural components) used as:
    1. An integral part of manufacturing, production, or extraction, or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services;
    2. A research facility used in connection with any of the activities in (a) above; or
    3. A facility used in connection with any of the activities in (a) for the bulk storage of fungible commodities.
  3. Single-purpose agricultural (livestock) or horticultural structures. See chapter 7 of Pub. 225 for definitions and information regarding the use requirements that apply to these structures.
  4. Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum.
  5. Off-the-shelf computer software.
  6. Qualified section 179 real property (described below).

You can get refer IRS publication on depreciation. Also read if there is a difference between section 179 and bonus depreciation

By Prashant Thakur

Prashant Thakur is a tax advisor . He has written two books on tax laws of India. He regularly writes on his paid-only website http://taxworry.com. He is learning about the Internal Revenue Code of USA as many of clients and readers are of India origin and also are tax resident of USA . So . solving their tax issues require reference to IRC of USA.