2023 Section 179 in 5 minutes or Less
Section 179 is a federal tax deduction that is available for small and medium sized business. Qualifying purchases include new and used equipment, vehicles, machinery, etc. To use the deduction in tax year 2023, the property must be financed and put into service by end-of-day on December 31, 2023.
2023 Deduction Limit is $1,160,000
As part of the IRS tax code, Section 179 allows small and mid sized busineses to deduct the full purchase price of qualifying equipment from their 2023 taxes, if that equipment was purchased during the 2023 tax year. The deduction limit for 2023 has been increased to $1,160,000. This is up from $1,080,000 in 2022.
Bonus Depreciation: 80% for 2023
Bonus Depreciation is in addition to Section 179. Some years it isn’t applicable but in 2023 it is eighty percent. What that means is that equipment costing more than $1,160,000 can still get a partial deduction.
2023 Spending Cap on Equipment Purchases is $2,890,000
Spend up to $2,890,000 on equipment. Beyond $2,890,000 the Section 179 Deduction starts to drop — dollar for dollar. This cap makes Section 179 a “small/medium business tax incentive”.
(FYI: larger businesses that spend more than $3.7 million on equipment won’t get the tax break.)
Section 179 Qualifications
Section 179 Qualified Financing
Section 179 and Bonus Depreciation are available for all leases and financing done for equipment, software, building improvements, computers, office furniture/equipment, etc.
Contact a Taycor Finance Professional today to discuss your needs and how we can help you meet your goals prior to the December 31st deadline.
Qualifying Property & Equipment
New or Used Equipment, Off-the-Shelf Software, Vehicle for Business Use – weight 6K pounds or more, passenger vehicles capped at $11,160, Computers, Machinery, Office Furniture, Office Equipment, Other Tangible Goods. Most improvements to non-residential building interiors put in service after December 31st, 2017. Other improvements to non-residential buildings such as: HVAC, roofing, security systems, alarms and fire suppression systems. Property must be used more than 50% of the time by the business to qualify for the deduction. Note: new laws allow 100 percent depreciation to be applied to qualified film, television and live theatrical productions.
Non-Qualifying Property & Equipment
Custom Software, Personal Vehicle (no business use), Certain non-residential improvements (building enlargement, any elevators or escalators, internal structural framework of building, most plumbing, electrical, renewables, lighting, construction, etc.). Note that the following types of property are not eligible for the one hundred percent bonus depreciation: property used in the trade of Electric energy, water or sewage disposal services, gas or steam through a local distribution system, or transportation of gas or steam pipeline, floor-plan financing.
Property & Equipment with Partial Qualification
If an item is used for both business and personal, the deduction will apply to the portion of time the equipment is used for business purposes.
Simple Math: Asset Cost multiplied by % Use by Business equals Amount Eligible for tax break.
Note: The property must be used more than 50% of the time for business purposes to qualify. Special rules apply for longer production period property and certain aircraft, consult a tax professional.
This webpage was created to answer questions about the 2023 Section 179 Tax Deduction. We have endeavored to explain these complex tax rules in plain terms; and we’ve attempted to outline what property qualifies under Section 179 for the tax deduction; and we’ve provided specific examples of how this incentive could impact your bottom line. Additional information can be found on the IRS site as well as by contacting a Taycor Finance Professional at 800-322-9738. As always, contact a tax professional before making any important buying decisions.