If you’re a business owner, you don’t need to be an expert about the IRS tax code. Although it’s obviously very important to meet your tax obligations, you can hire an experienced tax professional to assist you. By getting tax assistance and guidance from the right professional, you can stay on top of all your obligations and ensure you don’t miss out on any opportunities to reduce how much you owe.
Section 179 is the perfect example of an option that can help businesses reduce what they owe. While sections of the tax code can seem very complicated or even mysterious, this one is relatively straightforward. The purpose of Section 179 is to give businesses the ability to fully deduct qualified purchases in the year they make them. So instead of needing to spread this deduction out over several years of depreciation, businesses can reap these benefits all at once.
The answer to that question is no. However, having that association with it is completely understandable. When the US government created this section of the tax code, they did so to incentivize businesses to invest in themselves by purchasing the equipment they need to thrive and grow. Where the “loophole” aspect of Section 179 comes into the picture is there was a time when plenty of businesses used this section of the tax code to write-off the purchase of vehicles which qualified at the time.
Because that specific aspect of Section 179 did start to be viewed as a widespread loophole, the current limits on business vehicles have been significantly reduced from where they were. The good news is the rest of Section 179 is still very useful for small businesses (as well as larger ones).
The deduction limit for the twelve months of 2016 is half a million dollars. That deduction applies to both used and new equipment, along with off-the-shelf software. In terms of what qualifies equipment for this deduction, the main criteria the IRS follows is it must be used for business purposes more than 50% of the time.
The other notable aspect of Section 179 for 2016 is the spending cap. The amount for this year is two million dollars. In the event a small (or larger) business manages to exceed that threshold, they can still take advantage of bonus depreciation. This year’s bonus depreciation is set at fifty percent.
Yes, there are still some benefits available for business vehicles. The summary is certain passenger vehicles have a total depreciation deduction limitation of $11,060, while other vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes qualify for a full Section 179 deduction. If you have specific questions about this aspect of Section 179 or other business tax issues, contact us for a free consultation.
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