Section 179
A tax provision allowing immediate expensing of certain business assets.
Section 179 of the IRS tax code lets businesses deduct the full purchase price of qualifying equipment and software in the year it's placed in service, rather than depreciating it over several years. The 2024 deduction limit is $1,220,000, and it begins to phase out when total equipment purchases exceed $3,050,000. The asset must be used more than 50% for business.
Example
A contractor purchases a $45,000 work truck and elects Section 179 to deduct the entire cost in year one, saving $10,800 in the 24% bracket instead of depreciating over five years.
Why It Matters for Your Business
Section 179 is one of the most powerful tax savings tools for small businesses, allowing you to write off equipment purchases immediately and reduce this year's tax bill.
Practical Tips
- •Time major equipment purchases near year-end to maximize the current-year deduction.
- •Verify that the asset qualifies—certain property like real estate improvements has different rules.
Related Terms
More Taxes Terms
Adjusted Gross Income
Gross income minus specific deductions like retirement contributions.
Tax Audit
An examination of tax returns by the IRS to verify accuracy.
Capital Gains
Profit from selling an asset for more than its purchase price.
Capital Loss
Loss from selling an asset for less than its purchase price.
Tax Deduction
An expense that reduces taxable income.
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