Section 179 Deductions May Be the Best Christmas Gift for Small Businesses

08 Dec, 2016 / Comments: Comments Off on Section 179 Deductions May Be the Best Christmas Gift for Small Businesses / By

There are many small business owners that can now breathe a sigh of relief now that they know how much they’re able to deduct for such purchases as furniture, vehicles, computers, and machines under the Section 179 deduction. In fact, the Section 179 deduction may just be the best Christmas present that small business get all year!


What is The Section 179 Deduction?

The Section 179 deduction recently raised the deduction from $25,000 to $500,000. This bigger deduction is aimed to help stimulate the economy and covers such business expenses as furniture, computers, machinery and vehicles. Under the deduction, small business owners are able to deduct the full purchase price of such items in the year that they purchased it. Essentially, when your small business purchases equipment, such as a company vehicle or furniture, it typically needs to deduct the expense over an extended period of time as it’s considered a depreciating asset. However, the Section 179 deduction allows small business owners to write off the whole purchase during the year that the equipment is bought and used. Be aware that in order to take advantage of Section 179 for this tax year, the equipment must be bought or financed and used within 2016.


Why the Section 179 Deduction is Great for Small Businesses

The deduction is one of the most tangible things that a small business can do in order to save money. It’s a deduction that has a significant and immediate benefit. The deduction is also permanent, which means that small business owners have a chance to do better long-term planning.


Should You Do Some Last Minute Shopping?

There is indeed still time to purchase the equipment you need, which will qualify under the Section 179 deduction. However, this is only the case if you use them before the end of the year. Due to the fact there’s no longer any guesswork with how much you can deduct under Section 179, you can easily plan out your purchases and your growth. If you plan your purchases right, you may not need to pay all that much in taxes this year.


Reinvest in Your Small Business with Section 179

By using the Section 179 deduction, you can free up cash that you can put towards new equipment that you need in order to keep your business up to date. It allows you to keep money that you can reinvest into your business immediately the following year. Even if you don’t have a need for major equipment, taking the Section 179 can aid you in improving cash flow. For instance, you can use it to cover computers and office equipment so that you can put money back in your company straight away. Keep in mind that it’s always better to have money on hand today than have if five years from now and it’s better to take a deduction today than over a span of five years.


The Section 179 Allows You to Go Green

If you’ve been looking to create an eco-friendlier workspace, than the Section 179 deduction can help you do so as it affects those small business that use energy-efficient commercial buildings. However, you have to act quick as it’s only in effect until the end of 2016. The deductions let building owners retrofit or use a new energy efficient building and get a $1.80 deduction per square foot as long as they meet certain criteria. Although being environmentally-friendly has been touted as being expensive, this deduction can actually allow you to save money while also helping to save the planet.

William Mahnic
William Mahnic is a Finance Professor at Case Western University and has spent more than 20 years in the finance industry before becoming a professor. Mahnic has appeared as a commentator on both TV and radio talk shows including NPR, Crain's Cleveland Business, WKYC 3 and The Washington Post. He has been interviewed in BusinessWeek, Wall Street Journal and The Los Angeles Times.

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