Let’s face it, few of us have the time or desire to spend our time reading tax codes. We get it. However, if you own a business of any size, it is critical you read and act on Section 179 of the Tax Code before 2019 if you are considering the purchase of a new security or fire system. This generous tax code, which can end or change soon, allows for the full deduction of security systems purchased and installed before 2019.
Section 179 is For Small and Medium Businesses
Many times, the small and medium business gets left out of the loop on the more substantial
tax deductions. That is not the case for Section 179 of the Tax Code. It was created with the smaller business in mind to help stimulate the economy.
Section 179 is an incentive created by the U.S. government to encourage businesses to buy equipment and invest in their business. While large businesses can and do benefit from Section 179, the original intent of this legislation was to provide tax relief for small and medium businesses.
What Does it Do?
This section of the tax code permits businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if your business buys (or leases) a piece of qualifying equipment, you can deduct the full purchase price from your company’s gross income. That equals substantial savings for the business.
Deduction Limits and Qualifying Property
In short, the deduction is up from the $500,000 limit in 2017, with the 2018 deduction limit for Section 179 allowing businesses to deduct up to a total of $1 million in purchases that qualify. This deduction phases out on a dollar-for-dollar basis after a business has $2.5 million in total qualifying purchases, reaching zero at $3.5 million. The Section 179 deduction applies to tangible personal property such as machinery and equipment which is purchased for use in a trade or business. The new changes broaden the scope of qualified property to include “qualified real property” which includes the following improvements to nonresidential real property after the date the property was first placed in service. This includes roofs, heating, ventilation, and air-conditioning property; fire protection and alarm systems; and security systems.
Bonus Depreciation and Section 179
An important difference is both new and used equipment qualify for Section 179 deduction, while Bonus Depreciation covers new equipment only and applies to residential property. Bonus Depreciation is useful to very large businesses spending more than Section 179’s spending limit for that year. Businesses with a net loss in a given tax year qualify to carry-forward the Bonus Depreciation to a future year. When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation – unless the business has no taxable profit in the given tax year.
This Code Can Change in 2019, So Act Now
If this tax deduction can benefit your business, it is critical to take advantage of it as soon as possible. Tax Codes change frequently and Section 179 may change each year without notice so, it benefits businesses to take advantage of this generous tax code while it is available.
RSF does not purport to be tax professionals and this information is not intended to and does not constitute tax advice. Please consult your tax advisor for more information regarding tax deductions for security systems. For more information, please visit the IRS website and the Section 179 Tax Deduction website.