If you haven’t yet reached the deduction limit for section 179, there are less than two months to make your purchases. You don’t want to leave money on the table. There have been a few changes to this section of tax law for 2020 to continue to help businesses. This article gives a quick overview of section 179 for 2020. For more detail, please check out the section 179 website, or ask your tax preparer.
The section 179 tax deduction is good for off-the-shelf software, as well as new and used equipment for your company. To be able to take this deduction on your taxes for 2020, the software or equipment must be financed or purchased in the calendar year of 2020. The deduction limit for 2020 is $1,040,000. If your shop hasn’t met that deduction limit yet, there’s still time. If your shop was thinking of buying any equipment or ERP software, this is the time to do it.
For 2020, the total spending cap for section 179 is $2,590,000. This is the limit of how much a company can spend on equipment during the 2020 tax year and still qualify for the section 179 deduction. The deduction phases out on a dollar for dollar basis after $2,590,000 is spent, with the entire deduction going away after $3,630,000 is reached.
Some years, no bonus depreciation is offered. However, in 2020, there is a 100% bonus depreciation. In a change from previous years, bonus depreciation applies to both new and used equipment. As long as the equipment is new to your company.
Section 179 exists to encourage businesses to invest in themselves. If your shop needs machines or software and you haven’t met the deduction limit yet for this year, it might be worth making those purchases now. Look at your shop’s goals and determine if a new machine or software could be just what your shop needs to grow next year. If you make that purchase now, you won’t have to wait as long before tax time when you can write it off.