179 IRS Tax Credit

Section 179 of the IRS tax Code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased of financed during the tax year, up to $1,160,000.

What is the IRS Section 179 Deduction?

Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year, up to $1,160,000. If your business buys or leases a piece of qualifying equipment, you can deduct the full purchase price from your gross income. The U.S. government created Section 179 to encourage businesses to spend money on equipment.

Section 179 is ideal for small and medium businesses looking for a tax advantage in 2023. Please remember, the $1,160,000 limit and 80% Bonus Depreciation are promised through 2023! It is also important to note that the 80% Bonus Depreciation includes used equipment.

2023 IRS Section 179 Tax Deduction

Cost of Equipment

Section 179 Deduction: Year One Write-Off

80% Year-One Bonus Depreciation:
(Bonus Depreciation starts after $1.16m limit is reached)

Total First Year Deduction

Cash Savings on Equipment Purchase:
(Assumes 21% Corp. Tax Rate: Actual saving may be higher for certain S-Corp, LLCs and Partnerships)

Lowered Cost of Equipment after Tax Savings

How does IRS Section 179 work?

When a business purchases qualifying equipment, the depreciation is typically written off a little at a time. For instance, if the equipment cost was $25,000, IRS Section 179 allows for 100% of the equipment cost to be written off in the year it was placed into service. A breakdown of Section 179 with an equipment cost of $1,500,000 - and a 21% corporate tax rate - would be:

Section 179 Deduction - $1,080,000
100% Bonus Depreciation - $420,000
Total 1st Year Deduction - $1,500,000
Federal Cash Savings - $315,000
Lowered Cost of Equipment - $1,185,000

Have a question about Equipment Financing?

Many businesses prefer to write off the entire equipment purchase price for the year they buy it. If a business can write off the entire amount, they are more likely to add more equipment that year instead of waiting over the next few years. This is the whole purpose of IRS Section 179; it helps motivate the American economy and your business.

For most small businesses (adding total equipment, software, and vehicles totaling less than $1,080,000 in 2022), the entire cost can be written off on the 2022 tax return.

If you still need information pertaining to the 2021 IRS Section 179 tax credit Click Here

Lease Corporation of America is not an authorized tax advisor. You must consult your tax advisor, visit irs.gov or contact the IRS helpline at 800.289.4933 to confirm whether or not you qualify for this tax benefit.