Businesses often miss great tax-saving opportunities because they were not aware certain tax breaks existed. Don't let that happen to you!
Your business does not want to overlook the Section 179 tax benefit. If you looking to acquire equipment, it could save your business thousands of dollars just for financing qualified equipment and using it in 2021.
The Section 179 tax incentive helps businesses reduce tax liability, improve cash flow, and reduces the financial burden of expanding your equipment inventory. This guide will highlight:
- Free tools for estimating your first-year deduction.
- Section 179 2021 spending caps and deduction limits.
- How Section 179 works.
- How to utilize Section 179 to your advantage.
You may uncover a hidden gem that turns your 2021 return into a money-saving masterpiece.
How Much Can You Save with Section 179?
Most methods of depreciation allow you to deduct a portion of the equipment’s purchase price throughout its useful life. Section 179 lowers the cost of your equipment by allowing you to deduct 100% of your equipment purchase (up to 1,050,000) the tax year you acquire it.
That means you get your maximum deduction on your 2021 return, instead of spreading it out over multiple years.
Tools to Calculate Your Section 179 Deduction
A Section 179 calculator can help you:
- Estimate your Section 179 first-year deduction.
- Estimate any potential bonus depreciation.
- Estimate your equipment cost after your tax savings.
To make sure your Section 179 tax savings estimate is accurate, check out these tools that can do the math for you.
Looking to see how much you can save with a Section 179 write-off? To see how much your equipment could save you on your 2021 income tax return, calculate your potential savings with Beacon Funding’s Section 179 Calculator.
To get started, type in the cost of your equipment. The calculator will show your first-year deduction, bonus depreciation, and net equipment cost after tax savings.
Remember to share your results with your accountant to see if you qualify.
See how much your equipment financing could save your business with a Section 179 tax deduction using Beacon Funding’s mobile app.
With the app, you can calculate your potential tax savings from anywhere. Bring it with you when you’re browsing for equipment and get the numbers to inform your decision-making.
Download the mobile app today on AppStore or on Google Play.
Section 179 for 2021 (What You Need To Know)
Section 179 allows businesses who pay cash, finance, or lease equipment to deduct all or part of the purchase price of qualifying equipment during the tax year.
Breaking down the numbers: Deduction Limit, Spending Cap, Bonus Deprecation, and Deadlines
The deduction changes every year, so we broke the numbers down for you.
Deduction Limit for 2021
The deduction limit is now $1,050,000.
Spending Limit for 2021
The spending cap is now $2,620,000. The deduction maxes out after $3,670,000.
Bonus Depreciation for 2021
Bonus Depreciation remains at 100%.
Qualifying for Section 179 Timeframe
To qualify, equipment must be financed between January 1st, 2021 and December 31st, 2021.
How Does Section 179 Work?
When your business acquires equipment, tax deductions are realized over its useful life.
Unlike other methods of depreciation, Section 179 helps to accelerate tax deductions, allowing your business to benefit immediately.
This incentive helps small businesses acquire equipment and invest in themselves. To claim a Section 179 write-off for Depreciation and Amortization, fill out form 4562 with your income tax return.
Straight-Line Depreciation Example
When you purchase qualifying equipment, it is typically written off a little at a time through depreciation. Take straight-line depreciation for example:
Let’s say you buy a truck with a useful life of 5 years for $50,000. Through other methods of depreciation, you would write off a portion of the purchase price annually, spreading your tax benefit in smaller increments over five years.
While deducting a little at a time can be beneficial, many businesses would prefer to receive their full tax benefit upfront.
Section 179 Depreciation Example
Now, let’s say you obtain that same $50,000 truck, however this time you use the Section 179 deduction. Now you’re able to deduct the entire purchase price of the equipment in the year you purchased it, significantly reducing the total cost of equipment to you.
Who Qualifies for Section 179?
Businesses that purchase eligible new or used equipment during the tax year may qualify for a Section 179 tax deduction. Every year, the U.S. government sets the deduction limit and spending cap for equipment. Once this limit has been reached, the deduction decreases on a dollar-for-dollar basis.
You can also take advantage of bonus depreciation for certain types of equipment above the Section 179 threshold, which helps reduce your tax burden further.
What Kind of Equipment Qualifies for a Deduction?
New or used equipment purchased for business use qualifies for the deduction.
Everything from heavy-duty equipment, business vehicles, office furniture, computers, and off-the-shelf software may be eligible. As with any tax-related questions, consult your CPA before purchasing to find out if the equipment you want is eligible for the Section 179 tax deduction.
Remember: The equipment must be used for business more than 50% of the time.
If you are thinking about acquiring new equipment to qualify for the deduction on your 2021 return, consider equipment financing. You can breakdown the cost of the equipment into low monthly payments while still receiving your max first-year deduction. A trusted equipment financing provider like Beacon Funding can help you acquire your equipment with financing so you can invest in your business today.
Check out the equipment financing plans available for your business.