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There’s no denying that inflation has hit us all, businesses and consumers alike. Small business owners report year-over-year revenues are up a whopping 87%, but that increase isn’t showing up on the bottom line. Profitability has actually dropped 4%.

Some business owners are pulling in their horns, deferring improvements and delaying expansions. Others see an opportunity to upgrade their operations by taking advantage of a generous tax break: Sec. 179.

Sec. 179 allows businesses to deduct 100% of the purchase price of equipment of new or used equipment, up to $1,080,000 for Tax Year 2022. And if you spend more than the $1.08 million ceiling, you can still deduct a portion of additional equipment purchases up to $2.7 million – all in the first year of ownership.

Even better, if you finance the equipment, the entire purchase price is deductible even though you haven’t paid the full amount. In effect, the deduction puts money in your pocket.

This deduction applies to a wide range of equipment:

  • Computers, hardware peripherals, and software, including RFID systems
  • Machinery
  • Office furnishings, including file storage systems and lockers
  • Office equipment
  • Vehicles
  • Tangible personal property used in business
  • Property attached to your building that is not part of your building, such as a warehouse rack system

Here is one example of how Sec. 179 pays you back:

Sec 170 Example 2022

  • One Important Caveat: You must make sure to put the equipment into service by December 31. This means your vendors need to ensure delivery in time to let you use your new equipment on or before December 31. (NOS has a quick-ship program for many of its products, for just such fiscal-deadline situations.)

If inflation has you deferring much-needed equipment purchases, talk to your accountant about the benefits of Sec. 179. Then talk to your vendors about delivery dates that will let you put your new equipment to work by December 31. You could come out way ahead!