If you have been putting off substantial systems or hardware upgrade, 2018 is an excellent year to move forward. This year, small and mid-size businesses can deduct up to $1,000,000 in equipment purchased (including computers and software) using an expanded Section 179 Tax Deduction.
The "Protecting Americans from Tax Hikes Act of 2015" (PATH Act) became law on December 18, 2015. The bill increased the Section 179 deduction limit from $25,000 to $500,000. Since 2015, the deductible has increased year by year, until undergoing major changes in 2018.
With the signing into law of H.R.1, aka, The Tax Cuts and Jobs Act in 2018, the deduction limit has increased to $1,000,000. Additionally, the spending cap on equipment purchases has increased to $2.5 million.
Section 179 Tax Deduction Basics
2018 Deduction Limit - $1,000,000
- The equipment must be financed or purchased and put into service between January 1, 2018, and the end of the day on December 21, 2018 to qualify for the tax deduction.
2018 Spending Cap on equipment purchases - $2,500,000
- This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced on a dollar for dollar basis. This spending cap makes Section 179 a true “small business tax incentive”
2018 Bonus Depreciation – 100%
- Bonus Depreciation is generally taken after the Section 179 Spending Cap is reached. The Bonus Depreciation is available for both new and used equipment.
The Bottom Line?
To qualify for these deductions, the assets must be purchased and placed in service in the year you are taking the deduction. Please contact us for more information on taking advantage of this tax benefit in 2018.