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Take advantage of Section 179 before December 31

Published Monday, December 19, 2016 6:00 am
by Greg Tigges

Don’t forget that you can deduct qualifying equipment and software purchases that you’ve made this year up to December 31 by using Tax Code Section 179.

Code Section 179 is an election to expense assets used in a trade or business in the year purchased rather than depreciating over their useful lives.” says Joseph W. Tucker, CPA with Hagan, Tucker, Schmitt & Gintz, LLC. “To claim the expense in 2016, the asset must be purchased and placed in service in 2016. Congress has made the election permanent for tax years 2016 and after, so there may be more flexibility in planning the timing of future purchases.”

Typically, depreciation deductions must be spread out over a period of years but Section 179 has changed that for certain purchases. It’s subject to dollar amount but this election allows you to deduct, in the tax year of purchase, the cost of qualifying property as long as that property is placed in use during that tax year. The annual deduction limit is $500,000 for tax year 2016 and is scheduled to increase to $510,000 beginning in 2017. However, with the recent elections, this could be subject to change.

“Due to the change in administration in Washington, some people believe there is a chance of tax rate reductions after 2016 so a deduction may be more valuable in 2016 than 2017. I make no predictions on this for the future.” says Tucker.

It’s a great way to reduce taxable income at the time you’re buying all new equipment, replacing old or malfunctioning pieces, or even upgrading. Keeping your equipment up-to-date so you can best serve your clients is a top priority for your business. Section 179 can help defray those expenses.

There are limitations on the deduction and situations where it is not advisable to use Section 179, so consult with a tax advisor before purchasing assets.