OPPORTUNITIES FOR YEAR-END TAX-SAVING STRATEGIES WITH SECTION 179 DEDUCTION

OPPORTUNITIES FOR YEAR-END TAX-SAVING STRATEGIES WITH SECTION 179 DEDUCTION

Unique tax-saving deduction for up to 1,080,000 dollars!

It’s that time of year again when business owners try to project what taxes will look like at year-end. Purchasing vending machines from eVending.com this year helps you benefit from a fantastic expense deduction plan.

The U.S. Section 179 of the IRS Tax Code provides eligible businesses an excellent opportunity to maximize their purchasing power. Section 179 (in the US tax laws of 2022) allows for a 100% percent deduction on vending equipment purchases this year. 

This tax-saving strategy facilitates a more extensive initial expense deduction than the standard depreciation method. This benefit, in turn, reduces the tax burden of your company. Remember that Section 179 deduction doesn’t lead to a net loss.

What Exactly is Section 179?

Most people think Section 179 deduction is some strange and complicated tax code. It isn’t, and you’ll see why in this blog post. Section 179 allows businesses to deduct, for the current year, the total purchase price of new and used equipment or software (financed or leased). 

You must use your purchased vending machines, equipment, and properties in service the same tax year that the deduction is taken. So, you must place the equipment in service between January 1 and December 31 for the year that the Section 179 deduction is taken. Well, we can read your mind. You are considering how much savings you can see in your year-end planning with this deduction, aren’t you? Read on to find out. 

Is Your Equipment Eligible?

Most equipment businesses purchase or lease qualifies for the Section 179 deduction. Here are some common types of equipment that you can use for this tax saving strategy:

  • Office equipment 
  • Office furniture 
  • Most business vehicles 
  • Tangible personal property utilized for business 
  • Computers and software 
  • Equipment (machines, and so on) bought for business use

Section 179 Highlights – 2022

  • The maximum amount for deduction – $1,080,000 (which is a $30,000 increase from the previous year) 
  • The maximum amount of purchased equipment (taking the full deduction) – $2.7 million 

Section 168(k) allows bonus depreciation (100% expensing at present) on eligible property and equipment, allowing accelerated depreciation with a lessened tax burden. It is similar to Section 179, and organizations can use both Section 179 as well as bonus depreciation allowances. However, the Section 179 deduction has to be applied first. 

So, you can take any eligible property purchased above the $1,080,000 limit in bonus depreciation. Therefore, this policy is great for businesses that spend more than the spending limit of Section 179. Bonus depreciation will phase out during the next seven years according to the schedule (refer to the table below). 

Date Placed in Service
Bonus Depreciation (In Percentage)
September 28, 2017 – December 31, 2022 100
January 1, 2023 – December 31, 2023 80
January 1, 2024 – December 31, 2024 60
January 1, 2025 – December 31, 2025 40
January 1, 2026 – December 31, 2026 20
January 1, 2027, and afterward 0

 

How Does Section 179 Work?

In the past years, when a business bought qualified equipment, it usually wrote off a little at a time with depreciation. In other words, when a company spent $50,000 on a machine, it could write off $10,000 annually for five years (to quote an example). While this is better than no write-off, business owners might prefer to write off the whole equipment purchase price for the year of purchase.

And this is exactly what Section 179 is all about – it allows your company to write off the complete purchase price of eligible vending machines and other business equipment purchases for the present tax year (up to $1,080,000). This gives a significant advantage for many companies (and the general economy). Businesses are using Section 179 to buy needed equipment right now, without waiting.

 Who is Eligible for Section 179?

All businesses that purchase, finance, and/or lease new or used equipment in the tax year 2022 qualify for Section 179 (assuming their purchases are less than $3,780,000). Most tangible goods that American businesses use, including “off-the-rack” software and business-purpose vehicles (with restrictions) qualify for this deduction.  

For guidelines on what property is included in the Section 179 tax code, click here. Also, to qualify for Section 179, the software and/or equipment bought or financed must be put into service by December 31, 2022 to implement Section 179 for 2022..  

In 2022, assets worth $1,080,000 can be expensed; this amount dispenses dollar for dollar when $2,700,000 of qualified equipment is put into service. 

Limits of Section 179 

Section 179 deduction does come with limits – and there are caps to the total purchase amount to write off ($1,080,000 for the year 2022), and limits to the total purchase amount of equipment ($2,700,000 for 2022).  

The deduction is eliminated on a dollar-for-dollar basis after a particular business spends $2,700,000. Thus, the whole deduction goes away when a purchase amount of $3,780,000 is reached.

“More Than 50% Business-Purpose” Requirement of Section 179

In order to have eligibility for Section 179, the software, vehicle(s), and/or equipment should be used for business purposes above 50% of the time. Just multiply the equipment, software, and/or vehicle(s) cost by the business-use percentage to find out the monetary value eligible for the Section 179 deduction.  

For more details, please click here. This tax-saving strategy may be subject to changes in 2023, so now is the right time for organizations to take advantage of this expeditious deduction. So, what are you waiting for? Hurry and benefit from the Section 179 deduction for the purchase of your vending machines and other business equipment.