Section 179 Updates
The 2018 Tax Cuts and Jobs Act has already begun to have a widespread effect on businesses in every industry. Large changes are the expanded expensing limit of Section 179 and the bonus depreciation reforms.
For a quick recap, Section 179 is a tax deduction that allows businesses to depreciate assets as an expense in the year it is purchased, rather than depreciating them over their depreciable life. Depreciating assets all in the first year helps reduce overall taxable income.
Taking effect in 2018, the deduction limit of Section 179 has jumped from $500,000 to $1,000,000. The spending cap was increased as well to $2,500,000. Now, a business can spend $2,500,000 before the deduction can be reduced.
The other major change to Section 179 is the increase in bonus depreciation from 50 percent to 100 percent. Bonus depreciation comes into play once the Section 179 limit has been reached. And with the 2018 updates, used equipment that is purchased or financed during the tax year can qualify for 100% bonus depreciation as well.
You may be wondering, as a small business owner, what does this mean for me? What these changes mean is simply that 2018 will be a great opportunity for you to update and expand your equipment. With a larger limit and used equipment now eligible for bonus depreciation, more businesses will be able to take advantage of the changes and benefit from them. Contact us with any questions about eligibility or how your business may benefit.