When you buy new IT equipment you can deduct the full purchase price from your gross income this year, rather than depreciate it over a few years.

But you must have purchased the equipment and put it into service by the end of the day on
December 31. Act NOW to guarantee your
benefit.

Hidden government benefit: Section 179 is a little known tax relief. You can write off the entire spend on new IT hardware (and some software) in this tax year, rather than depreciate over a few years.

The clause: To qualify you must make the purchase and put it into service by the end of the day on December 31.

The urgency: Hardware supplies can be unreliable at this time of year. The earlier you order, the less risk of missing out on your benefit.

Here’s How Section 179 works:

In years past, when your business bought qualifying equipment, it typically wrote it off a little at a time through depreciation. In other words, if your company spends $50,000 on a machine, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example).

Now, while it’s true that this is better than no write-off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it.

And that’s exactly what Section 179 does – it allows your business to write off the entire purchase price of qualifying equipment for the current tax year.

This has made a big difference for many companies (and the economy in general.) Businesses have used Section 179 to purchase needed equipment right now, instead of waiting. For most small businesses, the entire cost of qualifying equipment can be written-off on the 2024 tax return (up to $1,220,000).

Who Qualifies for Section 179?

All businesses that purchase, finance, and/or lease new or used business equipment during tax year 2024 should qualify for the Section 179 Deduction (assuming they spend less than $4,270,000).

Most tangible goods used by American businesses, including “off-the-shelf” software and business-use vehicles (restrictions apply) qualify for the Section 179 Deduction.

For basic guidelines on what property is covered under the Section 179 tax code, please refer to list of Section 179 Qualifying Equipment. Also, to qualify for the Section 179 Deduction, the equipment and/or software purchased or financed must be placed into service between January 1, 2024 and December 31, 2024.

For 2024, $1,220,000 of assets can be expensed; that amount phases out dollar for dollar when $3,050,000 of qualified assets are placed in service.

What’s the difference between Section 179 and Bonus Depreciation?

Bonus depreciation is offered some years, and some years it isn’t. Right now in 2024, it’s being offered at 60%.

The most important difference is both new and used equipment qualify for the Section 179 Deduction (as long as the used equipment is “new to you”), while Bonus Depreciation has only covered new equipment only until the most recent tax law passed. In a switch from recent years, the bonus depreciation now includes used equipment.

Bonus Depreciation is useful to very large businesses spending more than the Section 179 Spending Cap (currently $3,050,000) on new capital equipment. Also, businesses with a net loss are still qualified to deduct some of the cost of new equipment and carry-forward the loss.

When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation – unless the business had no taxable profit, because the unprofitable business is allowed to carry the loss forward to future years.

Section 179’s “More Than 50 Percent Business-Use” Requirement

The equipment, vehicle(s), and/or software must be used for business purposes more than 50% of the time to

qualify for the Section 179 Deduction. Simply multiply the cost of the equipment, vehicle(s), and/or software by the percentage of business-use to arrive at the monetary amount eligible for Section 179.

Understanding Software and the Section 179
Deduction

Software is an integral part of many businesses, and understanding how it relates to the Section 179 deduction is essential for optimizing tax savings. The Section 179 deduction allows
businesses to deduct the full purchase price of qualifying assets, including software, from their gross income. This page gives you an overview of how software and the Section 179 deduction work together.

Classification of Software for Depreciation

Software is typically classified as an intangible asset for tax purposes. However, not all software falls under the same rules for depreciation. There are instances where software is eligible for depreciation and times when it isn’t, depending on how it was acquired and its intended use.

If the software was acquired in connection with the acquisition of a significant part of a business, it generally cannot be depreciated. But, if the software is:

• Readily available for purchase by the general public,
• Subject to a nonexclusive license, and
• Has not been substantially modified, then it can be depreciated and may qualify for the Section 179 deduction.