Communication, audiovisual, and business equipment purchased in 2020 can qualify for a Section 179 tax deduction. Section 179 is an IRS tax code that lets businesses depreciate up to $1M dollars of equipment purchases in a calendar year. In 2020, Section 179 can potentially become even more useful for businesses that took advantage of CARES ACT (PPP Loans). BUT- there’s a catch- you’ll need to purchase and ship that equipment before the end of 2020.
What is Section 179?
Section 179 allows taxpayers to deduct the cost of certain property as an expense when the property is placed in service. For tax years beginning after 2017, the TCJA increased the maximum Section 179 expense deduction from $500,000 to $1 million. The phase-out limit increased from $2 million to $2.5 million. These amounts are indexed for inflation for tax years beginning after 2018.
The Section 179 deduction applies to tangible personal property such as machinery and equipment purchased for use in a trade or business.
Why is Section 179 Helpful For CARES ACT recipients?
The Paycheck Protection Program established by the CARES Act provided small businesses with funds to pay up to 8 weeks of payroll costs including benefits.
Payroll expenses for employees covered under the CARES act will be offset by the loan forgiveness, which could lead to many business reporting less expenses, and higher net income- if that business is lucky enough to report a profit. If that is the case, many businesses could face a larger tax bill from Uncle Sam.
If this is the case for your business, you can use Section 179 to purchase equipment before the end of the year- increasing reported expenses, decreasing net income- while also receiving a deduction in federal tax for the equipment purchased and delivered by the end of the 2020 calendar year.
What should I do next?
If you’re looking to purchase last minute, end of year equipment- this is the time to act. Our team is standing by to help you purchase and deliver the equipment that you need before the end of the calendar year. Contact us.
Disclaimer: Key Code Media and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.