2020 is Looking Strong, Because the Section 179 Deduction is BIG
The 2020 Section 179 deduction limit is $1,040,000. That’s a robust number, and
allows a business to deduct the full cost of new or used qualifying equipment from their 2020 taxes. This
can make a big difference to your company’s bottom line.
To take advantage of Section 179 for 2020, the equipment must be purchased and put into
service/installed by midnight 12/31/2020. To claim the deduction, use Form 4562.
Section 179 Deduction Limits for 2020:
The Section 179 Deduction for 2020 is $1,040,000. This means your company can deduct the full cost of qualifying equipment, up to $$1,040,000, from your 2020 taxes. This deduction is good until you reach $2,590,000 in purchases for the year.
Section 179 is a Tax Break for Small and Medium Businesses
Section 179 is meant to target small and medium sized companies. The full “up to one million dollars” deduction can be claimed until the $2,590,000 equipment purchases limit is reached. Once that limit is reached, the deduction decreases on a dollar for dollar basis, and reaches zero once $3,630,000 worth of equipment is purchased.
This makes it a very effective tax deduction for small and medium businesses, who typically will not hit $2,590,000 in purchases in any given year.
About the Section 179 Deadline
Small and Medium businesses love the Section 179 deduction. But to use it, the equipment must be purchased and put into service (or installed, plugged in, etc.) by 11:59 pm, 12/31/2020.
A Look Towards the Future
The Section 179 Tax Deduction has been made permanent. So it will be here for small and medium businesses. But again, remember the time limit above – to take the deduction for your 2020-year taxes,
it must be used during the 2020 calendar year.
| Section 179 Deduction Limits for 2020 |
|---|
| Deduction Limit | $1,040,000 |
| Limit on Capital Purchases | $2,590,000 |
| Bonus Depreciation | 100% |
Qualifying Property for Section 179:
- Tangible equipment used in business. This includes most goods a business would buy to successfully operate: production machinery, computers/servers, office furniture and office machines, storage tanks, signage, and just about any other type of commercial and/or office equipment.
- Commercial use vehicles, such as vehicles with 9+ passenger seats, cargo area of at least 6', or a fully enclosed driving compartment with no body section protruding more than 30" ahead of the
windshield.
- Passenger vehicles exceeding 6,000+ pounds GVW (gross vehicle weight) will typically qualify for Section 179 (essentially, heavy SUV’s). That stated, they are limited to a $25,000 deduction.
- Software can qualify for Section 179. The software must be available for purchase by the general public, and carry a non-exclusive license, without custom modifications. In other words, operating
systems, office suites, graphics programs, and similar. Note, at this time, websites and apps do not qualify.
- Certain storage facilities and/or structures utilized for agricultural / horticultural purposes will qualify. Examples include movable structures, grain silos, etc. Your “main” building does not qualify, however.)
- Certain building improvements, such as Roofs, HVAC, fire protection systems, alarm systems and security systems.
- Preowned / used versions of the above equipment will generally qualify for Section 179.
- If you have questions on whether equipment you wish to lease or finance will qualify for Section 179, you can always ask us, or reference IRS Publication 946.
The equipment listed above need not be new – it can be used (but new to you). Almost any "portable" (non-permanently installed) piece of business equipment will likely qualify. If you have any questions on whether something you wish to lease or finance will qualify for Section 179, you can always ask us, or reference IRS Publication 946.
Tax Code Section 179 limits have been modified by various Stimulus Acts over recent years. For further detail, contact your tax adviser or visit www.irs.gov and reference Form 4562.
Need Prior Section 179 Calculators?
