Get ready for tax season.

IRS Section 179 Tax Law

What is Section 179

Section 179 allows taxpayers to deduct the cost of certain property as an expense when the property is placed in service. For tax years beginning after 2017, the TCJA increased the maximum Section 179 expense deduction from $500,000 to $1 million. The phase-out limit increased from $2 million to $2.5 million. These amounts are indexed for inflation for tax years beginning after 2018.

The Section 179 deduction applies to tangible personal property such as machinery and equipment purchased for use in a trade or business, and if the taxpayer elects, qualified real property. The TCJA amended the definition of qualified real property to mean qualified improvement property and some improvements to nonresidential real property, such as roofs; heating, ventilation and air-conditioning property; fire protection and alarm systems; and security systems. Revenue Procedure 2019-08 explains how taxpayers can elect to treat qualified real property as Section 179 property. Learn more about section 179 here.

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2020 Section 179 Highlights

  • The new business deduction allowance for Section 179 is now $1,040,000 and has been made permanent.
  • The deduction ceiling for the maximum amount of equipment/software that can be purchased to claim the full deducted is now at $2,590,000.
  • Once you reach the $2,590,000 threshold, the deduction will decrease on a dollar-for-dollar basis.
  • Your deduction ability will end once $2,590,000 worth of equipment is purchased.
  • 100% bonus depreciation is now available which can dramatically add to potential equipment savings.