Section 179 Tax Deduction Basics
Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. This means when you buy (or lease) a piece of qualifying forklift equipment, you can deduct the FULL PURCHASE PRICE from your gross income.
In essence, you purchase part of the material handling equipment with the dollars you would have paid in Federal taxes. You improve your productivity while you increase your earnings. You are building your business for the future with pre-tax earnings today.
An Incentive for Businesses Large and Small
Despite recent spending cap changes, Section 179 is more beneficial to small businesses than ever. Section 179 is one of the few government incentives available to small businesses today. It has been included in many of the recent Stimulus Acts and Congressional Tax Bills.
(see ‘Vehicles & Section 179‘ for current limits on business vehicles)
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. Millions of small businesses are actually taking action and getting real benefits.
How Does Pandemic Stimulus Affect Section 179?
Much of the equipment businesses purchased to conform to COVID-19 restrictions will qualify for the Section 179 tax Deduction. Eligibility for the Section 179 tax deduction for 2020 is unaffected by any pandemic-related financial assistance a business may have received (e.g., PPP Loans, Stimulus acts.)
In other words, if a company received a PPP loan or any other Pandemic-related assistance, they may still claim their Section 179 Deduction.
How the Section 179 Deduction Works: Forklifts & other Equipment
In years past, when your business bought qualifying equipment, it typically wrote it off a little percentage at a time through depreciation. For example, if your company spends $50,000 on a piece of material handling equipment, it gets to write off $10,000 a year for five years. Though not ideal, it’s true that this is better than no write-off at all on the forklift or related machine.
Most business owners would really prefer to write off the entire forklift purchase price for the year they buy it. 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 increased the economy in general.) Businesses have used Section 179 to purchase needed forklift equipment right now, instead of waiting. For most small businesses, the entire cost of qualifying equipment can be written-off on the 2020 tax return (up to $1,040,000).
Who Qualifies for Section 179?
All businesses that purchase, finance, and/or lease new or used business equipment during tax year 2020 should qualify for the Section 179 Deduction. (assuming they spend less than $3,630,000)
Most tangible goods used by American businesses, including “off-the-shelf” software and business-use vehicles (restrictions apply) qualify for the Section 179 Deduction.
Is There a Deadline?
To qualify for the Section 179 Deduction, the equipment purchased or financed must be placed into service between January 1, 2020, and December 31, 2020. For 2020, $1,040,000 of assets can be expensed.
How Much Money can Section 179 Save a Business in 2020?
The Section 179 Deduction has a real impact on your forklift or equipment costs. Here’s an easy-to-use calculator that will help you estimate your tax savings. Simply enter the purchase price of your material handling equipment in the form, and let the calculator take care of the rest.
Please note that this Section 179 Calculator fully reflects the current Section 179 limits, rates, and any and all amendments / bonus depreciation.
Does all Forklift And Material Handling Equipment Qualify?
The IRS allows for Section 179 depreciation on tangible property, including forklifts, used in a business or income-producing activity. Your customers should see IRS Pub. 946 for more information and restrictions, and consult a tax advisor.
For basic guidelines on what property in addition to forklift equipment is covered under the Section 179 tax code, please refer to the information at www.section179.org.