Section 179: Deducting New Equipment Purchases

The year is nearing its end. Have you taken advantage of the tax breaks available to municipal contractors?

Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. Section 179 isn’t a new tax credit, but it changes pretty frequently and can be difficult to keep track of. It was created to encourage small businesses to spend and invest in themselves, and 70 percent of small business owners plan to take advantage of it this year.

Taking Advantage of 2018 Section 179 Tax Benefits

This year, the total deduction amount has been increased to $1,000,000 with a total investment limit of $2.5 million. This is double the amount offered last year, and the highest it has ever been. Because Section 179 is adjusted so often, there is no guarantee that these benefits will last. Those planning on making equipment purchases should take full advantage of this tax deduction while it’s still available.

For example, a municipal contractor who spent $200,000 on new mainline cutter can use Section 179 to write off the entire purchase price for the current tax year. If the contractor is in the 35% tax bracket, they’ll get $70,000 back in their pocket! In years past, when contractors bought qualifying equipment for their business, they could only write it off a little at a time through depreciation.

Please remember, all businesses are unique. Talk to a tax professional or accountant before making any decisions.

Qualifying for Section 179 Tax Credits

Between computers, mainline cutters and other pipeline rehabilitation tools, it takes a lot of different equipment to keep your business running. When assessing your business purchases, there are a few things to keep in mind:

• Timeframe.

  In order to qualify for the 2018 Section 179 Tax Credit, a purchase must be made and put into use between January 1st and December 31st, 2018.

• Amount of Business Use.

  Any purchases made must be used for business purposes over 50% of the time. Equipment that is used entirely for business purposes is eligible for a full price deduction. To calculate your deduction for purchases that are also used outside of your business, multiply the original cost by the percentage of business use. For example, the deduction for a $1,000 computer that’s used 70% for business and 30% for personal use would be $700.

• Used Purchases.

  Any equipment that’s new to the business owner can qualify; this includes used equipment as long as it was purchased from the previous owner in 2018.

The Right Time To Buy New Equipment

When figuring out the best time to purchase new equipment for your business, take its tax implications into consideration. That point repair system you’ve been eyeing could help decrease your total tax burden, while helping you sustain and grow your business. The purchases you’re putting off until next year may make more financial sense this year. Have you been putting off purchasing pipeline rehabilitation equipment for your growing business? Request a demo of our innovative products today: