Why Use Section 179

Why Use Section 179?

Taking advantage of the Section 179 deduction can have a significant impact on taxable income, particularly when financing is used to acquire the equipment. Just a few of the benefits include:

Many businesses prefer to lease equipment and use the Section 179 deduction because this can have a significant positive impact on both cash flow and profits.
Acquire and write off $050,000 worth of equipment, without actually spending the full $500,000 this year
In some cases the amount you save in taxes will be more than the total of you first year’s payments

As an example, a business that purchases $75,000 in equipment this year can reduce the amount of taxable income by that same amount and thus the tax paid. This leaves the business owner with more capital to invest back into the business. See the specific example below:

Tax paid using normal depreciation on a $50,000 equipment purchase

Taxable Income	$200,000
Deduction with 20% depreciation rate	$10,000
Taxable Income after depreciation	$190,000
Taxes owed (assuming 35% tax bracket)	$66,500

Tax paid using Section 179 on a $50,000 equipment purchase

Taxable Income	$200,000
Deduction using full Section 179	$50,000
Taxable Income after depreciation	$150,000
Taxes owed (assuming 35% tax bracket)	$52,500

Using the example above this business would have an additional $14,000 in capital to use toward growing the business. To calculate your savings use our free Section 179 Loan Calculator.

Other Incentives for Small Businesses:

Bonus Depreciation: Under this new law you are allowed to extend the 50% first year bonus depreciation. This 50% bonus depreciation is taken above the regular depreciation reported for the year the property is placed in service.

Depreciation Amount: A an extra 1-year boost in the amount that can be deducted on capital expenditures for equipment that you would normally depreciate over time. And this amount has been increased to $500,000 for the qualified property.

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