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What do the latest updates to IRS Section 179 mean for you?

When managing the overall financial health of your small business, staying on top of the latest tax deductions is a wise move. Deductions for vehicles, salaries, contract labor and supplies can really add up.

In 2017, Congress passed the Tax Cuts and Jobs Act (TCJA), which made some sweeping changes to business tax law and upped the ante on deductions. One of the most notable was the adjustment made to the IRS Section 179 tax deduction, increasing its limit from $500,000 to $1 million. For 2019, this limit is $1,020,000, reduced by the amount that purchases exceed $2,550,000 (both numbers are indexed for inflation going forward).

Businesses can useSection 179 to deduct the cost of certain assets as expenses during the year in which they were placed in service. It’s like accelerated depreciation; instead of depreciating costs over five or more years, you can deduct the entire cost in the year the asset was ready and available for use.

With Section 179, you can capitalize your assets and put them on your balance sheet so they don’t become an expense. As a result, you reduce your overall profit and maximize your tax savings.

Do my purchases qualify?

It depends. Here are some quick facts:

For a detailed review of the types of assets and expenses eligible, along with limitations, stay tuned for the next installment in this series, What qualifies for Section 179?

When and how to apply

Oftentimes, business owners are hesitant to get started with certain deductions. Don’t be afraid; it’s easy! You elect to take the Section 179 tax deduction when you file your annual tax return, whether you’re filing on time or with an extension.

The process is straightforward. Simply fill out Part 1 of IRS Form 4562 and attach it to your tax return, just like any other form. Although filling out some IRS forms can be daunting, again, don’t panic. A qualified tax consultant can provide assistance, or you can do a deeper dive into the IRS guidance by reviewing Revenue Procedure 2019-08.

Growing your business using Section 179

A CIT representative is happy to provide financing options to you well before your fiscal year closes so you can grow your business and take advantage of the benefits Section 179 affords you. Feel free to download our complete e-book, Your 2019 guide to Section 179, or reach out to us today to get the ball rolling.  

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