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11/12/2019

What qualifies for Section 179?

In 2017, Congress passed the Tax Cuts and Jobs Act (TCJA), which made some big changes to business tax law, including Section 179, a tax deduction used to deduct an asset’s cost as an expense in the year it is placed in service.

Qualifying conditions

Yes, reading tax publications can be mind-numbing. So we’ve highlighted some of Section 179’s conditionsin plain English. Here are a few points to consider:

  • Eligible equipment must be new-to-you; even used equipment that is new to your business qualifies!
  • Section 179 applies to tangible personal property and qualified real property (examples to follow); the latter was amended to include “qualified improvement property and some improvements to nonresidential real property."
  • The deduction limit for Section 179 is $1,020,000 for tax year 2019 and is reduced by the amount by which the cost exceeds $2,550,000.

There are six categories of depreciable property that qualify for the Section 179 deduction: 

  1. Tangible personal property: machinery and equipment; property contained in or attached to a building such as refrigerators, grocery store counters, office equipment, printing presses, testing equipment and signs; gasoline storage tanks and pumps at retail service stations; livestock including horses, cattle, hogs, sheep, goats, mink, etc.; portable air conditioners or heaters (placed in service after 2015); certain property used predominantly to furnish lodging
  2. Other tangible property: property that is (a) an integral part of manufacturing, production or extraction or of furnishing transportation, communications, electricity, gas, water or sewage disposal services (excludes buildings); (b) research facilities used in connection with activities in (a); or (c) a facility used in connection with any of the activities in (a) for the bulk storage of fungible commoditie
  3. Single-purpose agricultural (livestock) or horticultural structure
  4. Storage facilities used in connection with distributing petroleum or any primary product of petroleu
  5. Off-the-shelf computer software such as Quickbooks or Microsoft Offic
  6. Qualified Section 179 real property including improvements placed in service after non-residential real property was placed in service, such as heating, ventilation and air-conditioning; fire protection and alarm systems; security systems; roofs

Sorry, these are disqualified

As with other types of tax deductions and expenses, not everything counts. Here are the exceptions:

  • Ineligible property
    • Building
    • Land
    • Trailers (non-mobile)
    • Fences
    • Docks
    • Swimming pools
    • Landscaping
    • Billboards (unless movable)
  • Disqualifying conditions

Some property is not qualified under Section 179. Examples include property that is:

  • Not used in trade or business (or is used in business 50% or less)
  • Acquired by gift, inheritance or trade
  • Purchased from certain related parties
  • Outside of the United States
  • Used by tax-exempt organizations or governmental units
  • Used by foreign persons or entities
  • Held by an estate or trust
  • Considered a soft asset, like a brand or human resources

Push the limit with bonus depreciation

Once you reach your Section 179 limit, bonus depreciation kicks in and you can do a 100-percent depreciation deduction in the first year for certain property. For instance, if you place more than $2,550,000 of qualifying equipment like machinery, equipment, computers, appliances and furniture in service between Sept. 27, 2017, and Jan. 1, 2023, you can deduct 100 percent of the purchase. 

Accelerate business value with Section 179

Before the year ends, do you want to take advantage of the benefits of Section 179? Easily apply for an equipment loan with us in just minutes, or download our e-book Your 2019 Guide to Section 179 to get started!

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