With end of year approaching, would your business benefit from purchasing new or used equipment, technology or software in 2024?  Would this help to facilitate growth and increase profits?  But are you unsure how this may impact your finances and taxes?

If so, now is a good time to evaluate how Section 179 deduction can factor into your business and tax strategy for 2024.

In a nutshell, Section 179 deductions can reduce current year taxation, accelerate business growth, and build a foundation for years of success through capital investment.

Reach out to MyCFO to determine whether to act quickly to take advantage of Section 179 this year or whether to make it part of your tax strategy for 2025 (Note: This article provides an overview of Section 179; see MyCFO for professional guidance).

Below are some FAQ on Section 179:

What is Section 179?

As a part of the IRS tax code, Section 179 allows businesses to deduct the full purchase price of qualifying equipment bought or financed during the current tax year.

This significant tax incentive is designed to encourage businesses to invest in purchasing the equipment they need to grow, thereby helping the overall economy.  Section 179 offers much-needed tax relief for small businesses.

Why Use it?

While depreciating assets can be a useful tax strategy, many business owners find that it is better to write off the entire equipment purchase price for the year they buy it, using the Section 179 deduction.

Some of the key benefits include:

• Instead of depreciating an asset over several years, the option to fully deduct the entire purchase price allows reduced taxation for the current year. If you are having a banner year and looking for end-of-year deductions, this is a straightforward technique.
• The option of using Section 179 causes many businesses to purchase assets immediately vs. waiting, purely due to the tax incentives, allowing them to benefit quickly from these capital investments.
• For most small businesses, the entire cost of qualifying equipment can be written-off on the 2024 tax return (up to the deduction limit of $1,220,000 with a capital purchase limit of $3,050,000).
• Beyond immediate tax savings, the goal of this acquisition of capital equipment is to enhance operations and boosts revenue.

Who Qualifies for Section 179?

All businesses that purchase, finance, and/or lease new or used business equipment during tax year 2024 should qualify for the Section 179 Deduction (assuming they spend less than the limit). This equipment is generally limited to tangible, depreciable, personal property which is acquired for use in the active conduct of a trade or business, and can include upgrading/replacing upgraded equipment, vehicles, and software (see your CPA for a complete list of qualifying equipment). The equipment must be used for business purposes more than 50% of the time to qualify for the Section 179 Deduction.

To take the deduction for tax year 2024, the equipment must be financed or purchased and put into service (not just ordered and/or deposit paid) between January 1 and December 31, 2024.

What’s the difference between Section 179 and Bonus Depreciation?

Bonus depreciation is generally taken after the Section 179 spending cap is reached, so it is typically used by larger businesses. Bonus depreciation is at 60% in 2024 under current law, decreasing to 40% in 2025.

Get Strategic Advice

MyCFO  can be helpful in calculating the cost/benefit of taking advantage of Section 179 in 2024, given the particular financial and tax situation of your business.  Other situations should be discussed with MyCFO, such as if your business has a net loss and whether it makes senses to purchase equipment and carry-forward the loss.

The tax professionals at MyCFO offer invaluable expertise, so contact us today for a free initial consultation!