One million dollars. Now that we have your attention, here’s how you get that kind of money: Section 179 of the IRS tax code. Sec. 179 allows you to deduct the cost of business equipment – up to $1 million – that you purchased or leased in 2020, and put into service in the same year. Rather than depreciating that equipment over several years, you can deduct the full value of the equipment in Year 1.
The COVID pandemic has changed how many of us do business. Have you had additional equipment expenditures to accommodate those changes? If you bought equipment to support WFH workers, or purchased touchless lockers, or RFID social-distancing equipment, or social-distancing office furnishings, those COVID-related expenditures qualify for the Sec. 179 deduction. It’s one bright spot in this year’s economic upheaval.
Almost any tangible business-related product qualifies for the deduction:
- Data hardware (essential for imaged-document storage and access)
- Equipment purchased for business use
- Office furnishings and fixtures, including high density mobile storage and lockers
- Office equipment
- Computers and off-the-shelf software
- Certain business vehicles, including fork lifts and 9-passenger vans
- Property attached to your building that is not part of the building structure (casework and industrial shelving, for example)
- Tangible personal property used in the business, or equipment with a partial business use
- Some improvements to existing business-only buildings, including security systems, HVAC, and roofing
Keep in mind that leases as well as purchases qualify under Sec. 179. Even though you may be spreading payments out over several years, you can deduct the full value in the first year.
There’s only one hitch: You only have until Dec. 31, 2020, to put into service any equipment you want to deduct in tax year 2020. If you’re considering any equipment purchases, check with your vendors to see if they have a quick-ship program that will let you meet this deadline. And of course, make sure to check with your accountant to confirm that your purchases will qualify for Sec. 179.
We could all use a little financial relief this year. Sec. 179 may be just what your business needs.
Photo © denisismagilov/ AdobeStock