The holidays are here, which means tax season is right around the corner. You should plan for your taxes all year long, and you still have a couple months to finish the year out strong to reap the rewards of tax deductions with Section 179 when you file your 2015 taxes.
What You Need to Know about Section 179
Section 179 is a deduction that encourages small business and mid-size business owners to invest in their equipment and infrastructure. The deduction provides business owners with deductions for new equipment that is used for business operations. Business owners can choose to recover all or some of the depreciation costs by claiming the deduction in the year the company purchases qualifying equipment.
How Does Section 179 Save You Money at Tax Time?
If your business uses the software or equipment for more than 50% of the time, it may be eligible. Businesses can write-off $25,000 for 2015. The total equipment purchase cap is $200,000 for 2015. The deduction is designed specifically to promote growth and to support small and medium-sized businesses, as it begins to phase out after the expenses reach $200,000.
What Qualifies for Section 179
The property purchased or leased must be used for your business, all of the time or most of the time. Items that qualify include property that has been purchased, not inherited. The property must be for business use. Certain off-the-shelf software and tangible property applies. Common equipment that may qualify for Section 179 include:
- Office furniture
- Office equipment
- Computers, printers, infrastructure, all-in-one devices
- Off-the-shelf software
To qualify, you must start using the devices and/or software by December 31st, 2015.
Off-the-shelf Software Defined
Off-shelf-software is software that is available to the public, which means a company cannot have an exclusive or custom code. Small customizations are okay if the core software is standard. Software that has been modified considerably is not eligible for Section 179. The decide if the software you purchased will save you money on your taxes, ask yourself:
- Does this software have a non-exclusive license?
- Does the software for my computer to perform a certain function?
- Do I own or lease the software?
- Is the software necessary for my business to generate income?
- Is the software designed to last more than a year and does it have a determinable useful life?
What Does Not Qualify?
If you are not sure if your equipment or business expenses qualify, we have a breakdown of what is not eligible for the Section 179 deduction.
- Land, sheds, storage units, buildings, and building improvements
- Property that has been inherited or gifted to the business
- HVAC units
- Property you sold to your business with hopes it would qualify
- Property used outside the country
If you still need to make last-minute purchases, now is the time. Keep your receipts and talk to your tax professional about the Section 179 deduction.