Section 179 allows business owners to deduct the full price of qualifying purchased or financed equipment during the tax year. For the 2020 tax year, the equipment must be installed and put into service between Jan. 1, 2020, and Dec. 31, 2020. However, there are limits when it comes to Section 179.

“The deduction for 2020 is $1,040,000, but it’s also capped.” says Aaron Wilzbacher, vice president at Harding, Shymanski & Company, P.S.C.

To make sure this deduction is something that benefits small and mid-sized businesses, after eligible purchases reach $2,590,000, the $1,040,000 deduction begins to phase out on a dollar-by-dollar basis. Businesses that spend more than $3,630,000 on eligible equipment purchases won’t receive the deduction.

Though Section 179 is a permanent fixture in the Internal Revenue Code, each year the caps are adjusted for inflation. IRS Form 4562 is used to report a Section 179 deduction.

Another key part to Section 179 is that businesses can pick and choose which assets to deduct, giving this deduction a little more flexibility than bonus depreciation. And though it’s possible to get to zero taxable income with Section 179, the deduction can’t be used to put you in a taxable loss.

The information contained here is for informational purposes only and not to provide tax, legal, or accounting advice. United Leasing & Finance assumes no obligation to inform readers of changes in tax laws or other changes that could affect the information here. You should always consult your tax professional before making any financial or tax decisions. The information here is not intended for and cannot be used for purposes of avoiding tax penalties that may be imposed on any taxpayer.