Sec. 179 expensing provides small businesses tax savings on 2017 returns — and more savings in the future
Sec. 179 expensing is a tax-advantageous method that businesses can use to deduct the entire cost of eligible new or used depreciable property. However, determining which property meets the eligibility standards is a more complicated matter. 415 Group Manager Brian Raber, CPA, takes a deeper look at this tax break.
This provision is important to many of the business clients we work with. Sec. 179 expensing is a 100% write-off on qualified property, and the entire deduction is available in the tax year the property is placed in service. So, this deduction can be very helpful in justifying or even planning future purchases of depreciable business property. Not only can this tax break make a big impact immediately, it can also help offset eligible large purchases in the future.
One of the biggest areas of confusion I’ve seen surrounding the Sec. 179 expensing is how much of the eligible purchase is actually deductible. Certainly, 100% of the eligible property can potentially be deducted, however, there are limits in place that could affect the total benefit you would receive from this provision. To understand how much you might be able to deduct, you need to know the difference between the maximum deduction and the phase-out threshold. For 2017, the maximum deduction is $510,000 and the phase-out threshold begins at $2.03 million. So, if a business were to acquire qualifying property of less than the phase-out threshold, they could deduct that qualified property up to the full $510,000 limit. However, if this same business acquired qualifying property of $2.54 million or more, they would be completely phased-out and so they would be ineligible for any and all Sec. 179 expensing breaks. There is also a business income limitation that could affect your ability to take the deduction. Of course, this is only an example; your specific tax situation would dictate eligibility.
We see many of our clients take advantage of this tax program, so we are well versed in Sec. 179 requirements and the potential benefits. 415 Group is able to look at your tax situation holistically, and not only determine how this program affects your business today, but also how it might affect you in the years to come.