Section 179

Law has expanded deduction limit for 2016

All businesses need equipment on an ongoing basis, be it machinery, computers, software, office furniture, vehicles, or other tangible goods. Section 179 is designed to make purchasing that equipment during this calendar year financially attractive.

Almost a full year ago, the PATH (Protecting Americans from Tax Hikes) Act of 2015 was passed by both the House and Senate and signed into law. This bill expanded the Section 179 deduction limit to $500,000. Section 179 allows businesses to get tax benefits on purchased equipment for business use.

Businesses exceeding a total of $2 million of purchases in qualifying equipment have the Section 179 deduction phase-out dollar-for-dollar and completely eliminated above $2.5 million. Additionally, the Section 179 cap will be indexed to inflation in $10,000 increments in future years.

Equipment covered under Section 179 includes certain machines, business vehicles, computers, office furniture, office equipment, among other things. A comprehensive list is available here.

Also, a 50% bonus depreciation will be extended through 2019. Businesses of all sizes will be able to depreciate 50 percent of the cost of equipment acquired and put in service during 2015, 2016 and 2017. Then bonus depreciation will phase down to 40 percent in 2018 and 30 percent in 2019.

The PATH ACT passed in December of 2015 was made retroactive for the 2015 tax year, making the Section 179 deduction for 2015 $500,000. In addition, the 50% bonus depreciation was reinstated.
Click Here for the fully updated Section 179 Calculator for tax year 2015.

The Section 179 website advises to keep in mind that: to qualify for the Section 179 deduction, the equipment listed below must be purchased and put into use between January 1 and December 31 of the tax year you are claiming.

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