Calculate Your Tax Savings and Get Answers About Section 179
Financing has Never Sounded so Good—Especially when You See How Many Tax Dollars You Can Save
How Much Money Will a Section 179 Deduction Save You?
Section 179 was created for small businesses, like yours. When you purchase qualifying equipment, you can deduct the full cost of the equipment from your taxable income. Here’s an example:
$100,000 Equipment Cost
$30,000 Tax write-off (based on a 30% tax bracket)
Not only will you get the equipment you need now, but you’ll also reduce your taxable income for big savings now—when you need it most.
Use this calculator to see how much you can save in taxes when you finance new or used equipment for your business during the 2023 tax year.
Calculate Your Potential Savings
Frequently Asked Questions About Section 179
Like many business owners, you probably have questions about how Section 179 deductions work. Here are some of the most commonly asked questions:
Who Qualifies for Section 179?
Businesses that purchase or finance qualifying new or used equipment are eligible to take the Section 179 Deduction.
Most tangible goods used by your business, including machinery, off-the-shelf software, and business-use vehicles (with some restrictions), qualify for the Section 179 Deduction.
Also, the qualifying equipment must be placed in service during the tax year the write-off is being taken.
What is Changing with Section 179 in 2023?
| 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|
| Section 179 Maximum Deduction | $1,000,000 | $1,040,000 | $1,050,000 | $1,080,000 | $1,160,000 |
| Phase-Out Threshold | $2,500,000 | $2,590,000 | $2,620,000 | $2,700,000 | $2,890,000 |
| Bonus Depreciation | 100% | 100% | 100% | 100% | 80% |
| Does New & Used Equipment Qualify? | Yes | Yes | Yes | Yes | Yes |
What’s the Difference Between Section 179 and Bonus Depreciation?
Bonus depreciation for 2023 is 80%. Bonus depreciation will continue to ramp down for ensuing years: 60% for 2024, 40% for 2025, 20% for 2026, and 0% beginning in 2027.
Bonus Depreciation is useful to very large businesses spending more than the Section 179 Spending Cap (currently $2,890,000 for 2023). Also, businesses with a net loss will qualify to deduct some of the cost of new equipment and carry forward the loss.
While each deduction can help businesses deduct purchasing costs, combining them can offer the greatest possible benefits. IRS rules require that most businesses apply Section 179 first, followed by bonus depreciation.
What are the Limits of Section 179?
Section 179 does come with limits. There are caps to the total amount written off ($1,160,000 for 2023), and limits to the total amount of the equipment purchased ($2,890,000 in 2023). After that, the deduction begins to phase out on a dollar-for-dollar basis, which is what makes it a true small business deduction.
Have more questions of your own about Section 179? We’ll be happy to answer them.
This information does not constitute advice. Consult with your tax advisor to determine eligibility or visit www.irs.gov for additional information.
