We understand that at this time of year many manufacturing businesses think of year-end deductions. We want to ensure that every Manufacturer is aware of a generous tax deduction that could end soon, which allows businesses to deduct the full purchase price of commercial security systems if purchased and installed before 2019. Section 179 of the Tax Code could end or change without notice in 2019.
Section 179 is a Huge Advantage to Manufacturing Businesses
What is Section 179 and why is it so important? Section 179 is an incentive created by the U.S. government to encourage businesses to buy equipment such as fire and security systems and invest in their business. While large businesses do, of course, benefit from Section 179, the original intent of this legislation was to provide tax relief for small businesses.
Like many recent law and codes, Section 179 of the IRS Tax Code was designed with stimulating the economy in mind. This section of the tax code permits businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if your business buys (or leases) a piece of qualifying equipment, you can deduct the full purchase price from your company’s gross income.
More About Deduction Limits and Qualifying Property
Up from the 2017 limit of $500,000, the 2018 deduction limit for Section 179 allows businesses to now deduct up to a total of $1 million in purchases that qualify. The Section 179 deduction applies to personal property such as machinery and equipment which is purchased for use in a trade or business. The most recent changes expand the scope of qualified property to include “qualified real property” which includes the following improvements to nonresidential real property after the date the property was first placed in service. This includes roofs, heating, ventilation, and air-conditioning property; fire protection and alarm systems; and security systems.
Bonus Depreciation and Section 179
An important difference is both new and used equipment qualify for Section 179 deduction, while Bonus Depreciation covers new equipment only and applies to residential property. Bonus Depreciation is useful to very large businesses spending more than Section 179’s spending limit for that year. Businesses with a net loss in a given tax year qualify to carry-forward the Bonus Depreciation to a future year. When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation – unless the business has no taxable profit in the given tax year.
Why is it Important to Consider Now? This Code Can Change in 2019!
If this tax deduction can benefit your business, it is critical to take advantage of it as soon as possible. Though guaranteed through 2018, Section 179 may change each year without notice, so it benefits businesses to take advantage of this generous tax code while it is available, and before the new year.
We at SSP are not tax professionals and this information does not constitute tax advice. Please consult your tax advisor or visit the IRS website and the Section 179 Tax Deduction website for more information.