DRIVE YOUR BUSINESS FORWARD AND YOUR TAXES DOWN
It’s tax season, which means it’s time to take advantage of the 2023 Section 179 Tax Code Break!*
Using the US tax depreciation laws, eligible businesses may be able to write off up to 100% of the purchase price of select commercial new and used trucks purchased in 2023 for business use.
What is the Section 179 Deduction
Most people think the Section 179 deduction is some mysterious or complicated tax code. It really isn’t, as you will see below.
Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves.
Section 179 is more beneficial to small businesses than ever. Today, Section 179 is one of the few government incentives available to small businesses and has been included in many of the recent Stimulus Acts and Congressional Tax Bills. Although large businesses also benefit from Section 179 or Bonus Depreciation, the original target of this legislation was much needed tax relief for small businesses – and millions of small businesses are actually taking action and getting real benefits.
Here’s How Section 179 works:
In years past, when your business bought qualifying equipment, it typically wrote it off a little at a time through depreciation. In other words, if your company spends $50,000 on a machine, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example).
Now, while it’s true that this is better than no write-off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it.
And that’s exactly what Section 179 does – it allows your business to write off the entire purchase price of qualifying equipment for the current tax year.
This has made a big difference for many companies (and the economy in general.) Businesses have used Section 179 to purchase needed equipment right now, instead of waiting. For most small businesses, the entire cost of qualifying equipment can be written-off on the 2023 tax return (up to $1,160,000).
Below is an overall, “birds-eye” view of the Section 179 Deduction for 2023. For more details on limits and qualifying equipment, as well as Section 179 Qualified Financing, please check out the Section 179 Website.
Section 179 at a Glance for 2023
2023 Deduction Limit = $1,160,000
2023 Spending Cap on equipment purchases = $4,050,000
Bonus Depreciation: 80% for 2023
Limits of Section 179
Section 179 does come with limits – there are caps to the total amount written off ($1,160,000 for), and limits to the total amount of the equipment purchased ($2,890,000 in). The deduction begins to phase out on a dollar-for-dollar basis after $2,890,000 is spent by a given business (thus, the entire deduction goes away once $4,050,000 in purchases is reached), so this makes it a true small and medium-sized business deduction.
Who Qualifies for Section 179?
All businesses that purchase, finance, and/or lease new or used business equipment during tax year 2023 should qualify for the Section 179 Deduction (assuming they spend less than $4,050,000). Most tangible goods used by American businesses, including “off-the-shelf” software and business-use vehicles (restrictions apply) qualify for the Section 179 Deduction.
For basic guidelines on what property is covered under the Section 179 tax code, please refer to this list of qualifying equipment. Also, to qualify for the Section 179 Deduction, the equipment and/or software purchased or financed must be placed into service between January 1, 2023 and December 31, 2023.
For 2023, $1,160,000 of assets can be expensed; that amount phases out dollar for dollar when $2,890,000 of qualified assets are placed in service.
What’s the difference between Section 179 and Bonus Depreciation?
Bonus depreciation is offered some years, and some years it isn’t. Right now in 2023, it’s being offered at 80%.
The most important difference is both new and used equipment qualify for the Section 179 Deduction (as long as the used equipment is “new to you”), while Bonus Depreciation has only covered new equipment only until the most recent tax law passed. In a switch from recent years, the bonus depreciation now includes used equipment.
Bonus Depreciation is useful to very large businesses spending more than the Section 179 Spending Cap (currently $2,890,000) on new capital equipment. Also, businesses with a net loss are still qualified to deduct some of the cost of new equipment and carry-forward the loss.
When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation – unless the business had no taxable profit, because the unprofitable business is allowed to carry the loss forward to future years.
Section 179’s
The equipment, vehicle(s), and/or software must be used for business purposes more than 50% of the time to qualify for the Section 179 Deduction. Simply multiply the cost of the equipment, vehicle(s), and/or software by the percentage of business-use to arrive at the monetary amount eligible for Section 179.
Act Now to Maximize Your Savings!
The 2023 tax year is swiftly coming to an end, so don't miss out on the opportunity to save with the Section 179 Tax Code Break. Contact us today to discuss your trucking needs, explore your options, and take advantage of this incredible tax incentive.
Our team is here to assist you every step of the way, ensuring you get the most out of your investment while optimizing your tax benefits.
Don't let this opportunity slip away. Reach out to us to get started on maximizing your savings with the 2023 Section 179 Tax Code Break. Let Carolina International Trucks be your partner in success!
Here is an updated example of Section 179 at work during the 2023 tax year.
*Please remember to always consult an accountant or tax professional for specific advice and filing strategies for Section 179 and other possible tax deductions for your business.