Published May 11, 2023
Understanding Section 179 Deduction
Section 179 is a tax deduction designed to encourage small businesses to invest in their growth and improve their infrastructure. Under section 179, small businesses can claim an immediate deduction on certain depreciable equipment that was purchased during the tax year. This deduction can be up to the full amount the equipment was purchased for. By understanding the section 179 deduction limits, qualifying purchases, and claiming process, small business owners can maximize their tax savings while growing their business.
2022 Section 179 Deduction Limit
Starting with the 2022 tax year, the maximum amount small businesses can deduct with section 179 is $1,080,000. For businesses that spend more than $2,700,000 on property, the maximum amount they can claim is reduced by every dollar over until it is completely eliminated at $3,780,000.
Qualifying Purchases for Section 179 Deduction
To be eligible for the Section 179 deduction, the purchased equipment must meet the following criteria:
- Tangible, depreciable, and used in the active conduct of the business
- Acquired for use, not for resale
- Have a determinable useful life of more than one year
- Placed in service during the tax year for which the deduction is being claimed
Examples of qualifying property include:
- Computers and off-the-shelf software
- Office furniture and equipment
- Machinery and manufacturing equipment
- Vehicles weighing 6,000 to 14,000 lbs
Claiming the Section 179 Deduction
To claim section 179 deductions, small business owners must complete Part I of the IRS’s Form 4562, De