Section 179 Deduction Limit for 2023 and 2022

Maximize your equipment financing savings with Section 179: The tax incentive that allows you to make the most of your investment this year.

By Asher Zallik| Feb 8, 2023| 20421 Views
3 MIN
Section 179 Deduction Limit for 2023 and 2022

If you’re looking for a smart way to grow your business while optimizing your 2023 tax returns, equipment financing could be the answer you’ve been searching for.

Not only will this tax deduction help you stay up-to-date with the latest equipment models, but it can also provide you with accelerated tax benefits under Section 179.

In this article...

  1. Section 179 Deduction Explained
  2. Requirements for Section 179
  3. Section 179 Deduction Limits for 2023
  4. Calculate Your Potential 2023 Tax Savings in Seconds
  5. You May Qualify for a Tax Deduction by Financing Equipment in 2023
  6. Best Way To Secure Your Next Equipment Purchase
  7. Four Benefits of Combining Equipment Financing with Section 179 Deduction in 2023

By taking advantage of equipment financing and combining it with a Section 179 2023 tax deduction, you may be able to save more money for your business. Keep reading to learn more about how this financing option can benefit your business and help you keep more money in your pocket.

Section 179 Deduction Explained

What many businesses don’t know is that you can qualify for a deduction just for financing qualified equipment.

Rather than depreciating smaller portions of the equipment cost over several tax years, you can accelerate your deduction with Section 179. Write off 100% of the purchase price (up to $1,160,000) the year you finance it!

Normal Depreciation vs. Section 179

Unlike normal depreciation, Section 179 allows your business to deduct all or part of the purchase price during that same tax year of an equipment purchase.

Section 179 not only saves your business money but also reduces the cost of the equipment you purchase when you receive a larger deduction with a Section 179 tax benefit. That way, you can keep more cash in your pocket to invest in your business.

Let’s do a quick comparison between the two ways you can deduct your equipment’s purchase cost.

Scenario 1: Normal Depreciation

Normally, you would write off a portion of the equipment’s cost each year, spreading your tax benefits in small increments during that equipment’s “useful life.”

Then, let’s say you use that piece of equipment for five years – that would give you a $10,000 deduction each year for five total years.

Scenario 2: Section 179

Instead of writing off the equipment’s cost over five years, you would deduct the entire $50,000 in the same year you purchased it.

While deducting a little at a time is beneficial, many businesses prefer to receive total tax benefits upfront. Unlike other depreciation methods, Section 179 helps accelerate tax deductions and receive them immediately.

Requirements for Section 179

To be eligible to use Section 179 benefits, there are a few conditions you should be aware of.

1. Equipment must be purchased and in use before December 31st 2023

Start the process sooner than later. It might take some time for you to get the equipment you want.

Make sure there’s enough time for you to use your equipment before the calendar year ends. Don’t risk the equipment you want not being available, built, or delivered on time.

2. Eligible equipment

Both new and used equipment qualify. Everything from heavy-duty equipment, business vehicles, office furniture computer, and off-the-shelf software may be eligible.

As with any tax-related questions, consult your CPA before purchasing to determine if the equipment you want qualifies for the Section 179 tax deduction.

3. Equipment needs to be used for business 50% of the time

Put your equipment in operation before the deadline. Remember, you must have the equipment in your possession and used before the December 31st deadline.

The sooner you get your equipment, the more likely you can use this tax benefit to keep cash in your business.

Section 179 Deduction Limits for 2023

In 2023, the Section 179 deduction limit has been raised to $1,160,000 (an increase of $80,000 from 2022). This means your business can now deduct the entire cost of qualified equipment up to a total equipment purchase limit of $2.8 million.

If your business acquires equipment between January 1st to December 31st and uses it 50% of the time for your business before the end of the year, you can deduct it under Section 179.

Bar chart showing the deduction limit for Section 179 in 2023, 2022, and 2021.

Calculate Your Potential 2023 Tax Savings in Seconds

You can expense 100% of the cost of equipment you acquire in 2023 under Section 179.* If you plan to finance equipment before the end of the year, you may be able to benefit from this tax deduction. But how much can you actually save?

That’s where our FREE calculator comes in. By simply telling us a few details, you can calculate how much you can deduct using Section 179. Don’t miss out on potential tax savings – use our calculator to see how much you could save when you finance equipment this year.

CALCULATE HOW MUCH I CAN DEDUCT

Additionally, if you purchase equipment over $1,160,000 and put it into service by December 31st, you may qualify for Bonus Depreciation. Bonus depreciation details are complex, so be sure to consult your tax adviser!

You May Qualify for a Tax Deduction by Financing Equipment in 2023

Why is a Section 179 tax deduction important for your business? This tax benefit is an effective way to maximize your business’s profitability while investing in the equipment you need to succeed.

Here’s how it works. Jobs are created when businesses are encouraged to invest in themselves, like adding more equipment. Then there’s a corresponding increase in wages and payroll taxes from the businesses manufacturing, selling, and using the equipment.

Need Help Securing Your Next Equipment Purchase?

Today's scarce market makes it increasingly difficult for businesses to obtain the equipment needed to operate efficiently.

Due to robust demand and limited supply, businesses big and small are facing challenges when it comes to securing equipment. This can interfere with your business growth, caused by long wait times and heated competition. However, you can overcome these challenges by getting pre-approved for your next equipment purchase.

Benefits of Getting Pre-approved

Getting pre-approved can help you secure the equipment you need, even in the middle of today's scarce market. The sooner you start, the more likely you can use the opportunity to keep cash in your business and avoid the hassle of equipment not being available when you need it.

START MY PRE-APPROVAL NOW

Getting pre-approved includes...

  • No cost
  • No commitment
  • Only takes a few seconds
  • Is good for 45 days – giving you time to shop for your equipment

Insider Tip for Quick Assistance: Be sure to tell us the equipment you need and we can get you pre-approved within 24 hours.

4 Benefits of Combining Equipment Financing with Section 179 Deduction in 2023

Let’s recap. When you combine fast and easy equipment financing with Section 179 tax savings, your business has an easier way to fit equipment into your budget. This allows you to…

  • Maximize your cash flow.
  • Accelerate your income tax benefits.
  • Keep more cash & lines of credit open for future growth.
  • Know exactly what your monthly equipment expenses are.

Remember: Equipment must be in use before the end of 2023 to qualify for Section 179. If the equipment you are looking at takes a few months to deliver, plan ahead – that way, you can make sure it is available before the deadline.

As the industry leader in equipment financing, Beacon Funding can help you acquire needed equipment for low monthly payments that suit your business needs. If you’re ready to get a head’s start, apply for equipment financing today.

* Be sure to talk to your tax advisor to determine the tax ramifications of acquiring equipment for your business.

Asher Zallik
Asher Zallik

P: 847.307.6238 |  E: Schedule a Meeting with Me

Graduating with a bachelor’s degree from the University of Illinois at Urbana-Champaign, Asher Zallik is the financing consultant you will wish you knew when you started your business.



08/07/2023