A Refresher for Section 179 Deductions

When your business is purchasing equipment, it is important to determine how you will be depreciating it for tax purposes. There are a number of different options that allow you to take the tax benefits up front in the year you purchase it, or they can be spread out over a number of years. Understanding all of your options will help you to make the right decision based on your company needs. The specific details of what options are available for these types of deductions and write-offs are covered under IRS Section 179. Keeping up with the key details of Section 179 deductions will help you to maximize your tax savings with every equipment purchase.

Maximum Section 179 Limits for 2022

There have not been any major changes to the Section 179 deductions for 2022. The one thing to be aware of is that the maximum deductions are going up. This is because those maximums are written to increase each year based on inflation. So, in 2022 the maximum deduction is moving from $1,050,000 to $1,080,000. While this is not a major change, it is important to take full advantage of the limit if you qualify.

Bonus Depreciation

In the year that you purchase equipment, you will qualify for a special depreciation allowance, which is often called bonus depreciation. This option has been extended through 2022 so you can continue to take advantage of it. It is likely, though not certain, that having this option available will be extended through to future years as well. The bonus depreciation can be taken for up to 100% of the cost of the equipment purchased, and there is no dollar limit. You can also opt not to take the bonus depreciation and instead save it for future years when your revenue is expected to be greater so it will be more beneficial.

Clarity on Deductions for Vehicles

One of the most commonly asked questions about Section 179 deductions is related to vehicles used for business. While nothing has changed on these rules, it is important to make sure you are clear on them since vehicles are often a very costly investment for a business. First, in order to qualify for a deduction, the vehicle must exceed 6000lbs in gross vehicle weight. The next thing to note is that you can get the deduction whether you purchase the vehicle, or you choose to lease it. This gives businesses the flexibility to negotiate the right deals to meet their vehicle needs while still maximizing tax benefits.

Contact Us with Questions

Section 179 deductions are one of the largest deductions that a business can qualify for, so it is important that you do everything you can to maximize your savings. If you are making a large equipment purchase in 2022, make sure to speak with an attorney to go over your options so you can save as much money as possible. Contact our firm to schedule a consultation today. 

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