What is a Section 179 Deduction?
Section 179 is a tax code created by the US Government as an incentive for businesses to invest in themselves. Under this tax code, businesses can deduct the entire purchase price of qualifying equipment and/or software from their gross income.
How Can Section 179 Help Your Customer?
Under Section 179, your customer can choose to deduct the full expense of their equipment purchase rather than depreciating it over the course of the lease. By deducting the full expense in the year of the purchase, your customer gains additional liquidity from tax savings to put back into their business.
What Do You Need to Know?
All equipment must install before the end of 2011 to qualify for a deduction.
The customer must elect a capital lease option, generally referred to as a $1.00 purchase option.
The deduction limit is $500,000 (up from $250k in 2010). This deduction limit is good towards both new and used equipment, including software.
The limit on equipment purchases is $2 million dollars (up from $800k in 2010).
"Bonus" Depreciation is 100% (taken after the $500k deduction limit is reached). Note, bonus depreciation is only for new equipment. This can also be taken by businesses that exceed $2 million in capital equipment purchases.
Although the majority of assets qualify, including used equipment, double check with IRS Publication 946 to verify the equipment as eligible.
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