What is Section 179, and why should you care about it if you're a business owner?
Business owners who have purchased capital equipment in the past recognize Section 179 as a way to save money while continuing to grow their business. Section 179 is a tax break designed to encourage business owners to invest in their business, simultaneously boosting the economy as a whole.
If you own a business – a tattoo shop, med spa, physician practice, etc. – be sure to take advantage of Section 179 to save thousands on your taxes.
How do I qualify for Section 179?
Business owners can qualify for the Section 179 tax deduction by making a capital equipment purchase in the same calendar year you plan to make the deduction (2019).
Aesthetic lasers and other medical equipment are a perfect example of a capital equipment purchase that can grow your business or clinic. A portion, or all, of the purchase price can be deducted from your taxes in the year that you purchase your laser.
What is Section 179?
The IRS tax code, Section 179, was made with small businesses in mind. This deduction is intended to help small businesses grow by giving them a special tax break on investments that help grow their business, including capital equipment.
To take advantage of this deduction, business owners must complete the transaction before the end of 2019 and submit a simple IRS with your annual business taxes. Section 179 is applicable to purchased, leased, or financed equipment.
Purchase requirements to qualify for 2019 Section 179 tax break:
- Applicable toward business equipment, such as computers, office furnishings, off-the-shelf software, business-use vehicles, etc.
- The purchase must be used more than 50% of the time for the business (not personal use)
- Equipment can be new or used (as long as it's new to your business).
- Equipment can be purchased, leased, or financed, as long as the initial transaction took place in 2019.
- Land, buildings, or building improvement (i.e. construction or renovations) does not qualify.
- Less than $2,500,000 of equipment purchases are made in that calendar year (the Section 179 deduction is for small to medium businesses only)
Instead of deducting qualifying purchases over time – according to a set depreciation schedule – business owners can deduct the full purchase price during the first tax year with Section 179. When business owners take advantage of the Section 179 deduction, they save 35% on taxes that first year, as opposed to only 7% using a set depreciation schedule.
If you are looking to minimize your upcoming tax bill, this year may be the right time to purchase equipment for your business.
For a more robust description, the site Section179.org is the most comprehensive guide for learning about the deduction rules.
The 2019 deduction limit is set at $1,000,000 with an investment limit of $2,500,000.
For several of the past years, the deduction was at $25,000 (with investment limit at $200,000) and was raised to a deduction of $500,000 (with an investment limit of $2.5MM) late in the year by Congress. With the PATH Act, it is now permanently at the $500,000 deduction limit.
Here are previous deduction limits:
- 2018: $1,000,000
- 2017: 500,000
- 2016: 500,000
- 2015: $500,000
- 2014: $500,000
- 2013: $500,000
- 2012: $500,000
- 2011: $500,000
- 2010: $500,000
- 2009: $250,000
- 2008: $250,000
What Does this Mean for Your Business?
If you're interested in reducing your aesthetic business' 2019 tax bill and increase revenue in 2020, now is the perfect time to invest in your business with new aesthetic laser technology.
Financing your laser purchase does not prevent you from taking advantage of Section 179 savings. You can still deduct the full price of the laser in the initial year it is purchased. The deduction (for the full purchase price of the system) will likely match or exceed the upfront deposit and early payments on the system – making the capital equipment purchase a viable option for those interested in optimizing their 2019 business tax savings.
To qualify for Section 179 in 2019, your transaction and purchasing paperwork must be completed before the end of the year. If you have any questions about Section 179 tax deductions for your business, contact Astanza or your Astanza representative. Use this tax savings calculator to get an approximation of what you could save in 2019.
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