Finally, a tax deduction that benefits small business owners. Essentially, 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. That means that if you buy/lease equipment such as office furniture, you can deduct the FULL PURCHASE PRICE from your gross income. It's an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves.
The tax code works a little like this... When your business buys certain qualifying equipment, the company typically gets to write them off a little at a time through depreciation. In other words, if your company spends $50,000 on a machine, the company gets to write off $10,000 a year for five years (these numbers are only meant to give you an example). Now, while it's true that this is better than no write-off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it.
The ability to write off the entire amount purchased on equipment this year is allowed in hopes that the company will be able to scale and increase their equipment purchasing. That's the whole purpose behind Section 179 - to motivate the American economy (and your business) to move in a positive direction. For most small businesses, the entire cost can be written-off on the 2017 tax return (up to $500,000).
Section 179 isn't too complicated to figure out. The basic principal is that you buy, finance or lease qualifying equipment and/or software, and then take a full tax deduction on it this year. Here's a Section 179 Deduction Calculator to make estimating savings for Section 179 easier. Many people find that, if they lease or finance their Section 179 qualified equipment, the tax savings actually exceed the first year's payments on the equipment (making buying equipment profitable for the current tax year). This is perfectly legal, and a good example of the incentive that Section 179 provides small and medium businesses.
Now when considering what type of equipment to purchase, one must consider furniture as a top choice. The importance of purchasing the right type of furniture is often an overlooked aspect of the workplace. This is disappointing when you consider that most workers in the United States work 8 hours a day, which equates to more than a third of their day. That's a significant amount of time to be using old, poor functioning furniture or office supplies. The right furniture products and office supplies can help increase worker productivity and reduce injury if the correct products are utilized. In addition to health and productivity, furniture can give a lasting first impression dependant on what industry you are in. For example, let's say you run a real estate company and a potential client walks in and sees old furniture, they may be turned off by it and perceive your company as unsuccessful and unable to purchase quality furniture. The same goes with impressing potential new employees. Whether you want to update your current office design, try implementing innovative products like the phone booth, or just need to replace the old furniture around the office, the section 179 tax advantage can be used for it all.
So what are you waiting for? Smart companies use every weapon in their arsenal to beat out their competition. This tax code allows small business owners to reduce their overhead on essentials like furniture and use that money to help generate revenue or increase those holiday bonuses. The reason really doesn't matter, but it is important to capitalize on this tax advantage.
Section 179 for 2017 expires midnight, 12/31/2017. If you wish to deduct the full price of your equipment from your 2017 taxes and take advantage of the new higher deduction limits, it must be purchased and put into service by then.