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Tax deductions for newly-acquired assets can give you increased financial maneuverability—funds which can be reinvested into your company. Normally, the IRS requires businesses to subtract the depreciated value of the asset over the course of several years. However, Section 179 allows some small business owners the opportunity to recover the full amount at once. Since there are restrictions to this policy, however, you may want to discuss your situation with a business accounting services provider to determine whether you qualify.

A Brief Guide to Section 179

What Is Section 179?

accounting servicesUnder Section 179, a business can deduct the full purchase price of an acquisition, up to certain limits. Most commonly, this is used after the purchase of industrial machinery and heavy equipment, whether new or used, but it can also be applied to acquisitions of software, some work vehicles, and other investments made for the benefit of your business.

Limits on Section 179

This tax break is subject to strict caps, which are adjusted every year. In 2018, business owners are allowed to deduct up to $1 million in acquisitions, which includes all qualified purchases made during the year. For instance, if your business spent $240,000 in the first quarter on assembly line equipment, and another $260,000 at the end of the year, you would be able to exempt all $500,000 immediately.

How Section 179 Can Help

With proper planning and the advice of a skilled accounting services professional, Section 179 can reduce the financial impact of low revenue years and encourage investment. As an example, if your business had only $500,000 in gross income, but you made investments of $750,000, your taxable revenue would be $0, and you would be allowed to carry the remaining $250,000 into the next year. This amount can be written off your gross income, including wages and earnings from another employer, which can be extremely beneficial to those who operate a small business on the side.


 

For nearly 30 years, businesses throughout the Texarkana area have relied on Lee & Smith for reliable, relatable, and relevant financial advice and business accounting services. Whether you operate an established business or are launching a new startup, their tax planning professionals will guide you through the code and ensure you get every deduction possible. Visit their website for more on their tax planning and accounting services, follow their Twitter for tips and news, or for full disclosure and information on Section 179, call (903) 832-4339.

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