Section 179 Quick Guide

Your business may qualify for significant tax savings.

Understanding the basics of Section 179

Section 179 is a tax deduction, which allows businesses to subtract the cost of certain types of assets from their balance sheet. Qualified purchased assets or leased assets can be written off as an expense during the purchase year. In order to meet the tax deduction, the qualified assets must be in use by December 31 of the tax year. Businesses can elect the tax deduction when filing their annual tax return.

The visual represents out of pocket costs for newly acquired leased or purchased equipment eligible for Section 179. While both leased and purchased equipment may qualify for the deduction, the difference is out of pocket expense. With leased equipment, you can pay less upfront, pay monthly lease payments, and still receive 100% deduction under Section 179.

Section 179 visual

Write it off now and pay it off over time

The Tax Cuts and Jobs Act of 2017 extended Bonus Depreciation to 100% and increased the Internal Revenue Service (IRS) Section 179 limit to $1,080,000 (adjusted for inflation) for 2022 on qualified equipment.*

This means you may be able to write off most or all the cost of newly acquired capital equipment in 2022. New capital equipment which is purchased and/or financed and placed into service between January 1 and December 31, 2022 may qualify for these deductions. This may include equipment that you acquire via capital lease ($1 purchase option).

Additional information to consider:
  • If IRS Section 179 allowance of up to $1,080,000 is used, capital equipment purchases over the allowance amount may be eligible for 100% Bonus Depreciation. Expense deduction phases out with purchases starting at $2,700,000 and completely phase out at $3,780,000.
  • OR, 100% Bonus Depreciation may be used instead of Section 179 for capital investment.*

Which assets qualify for Section 179?

Most leased equipment and software will qualify for Section 179. Qualifying assets can be used equipment if it is new-to-you. Explore qualifying assets for Section 179:

Qualifying Assets

  • Automobiles
  • Computers and software
  • Office equipment
  • Machinery
  • Tractors
  • Trucks

Ineligible Assets

  • Billboards
  • Buildings
  • Fences
  • Land or Landscaping
  • Non-mobile trailers

Discover the benefits of Section 179 and bonus depreciation

The Tax Cuts and Jobs Act of 2017 increases Section 179 expensing and bonus depreciation for eligible equipment. Both new and used equipment may qualify for both Section 179 and Bonus Depreciation if the equipment is new-to-you.

Example of an equipment purchase of $500,000
Purchase price $500,000
1st year Section 179 allowance $1,080,000
Total 1st year tax deduction $500,000
Potential 1st year tax savings in the 21% tax bracket $105,000
After tax cost of equipment $395,000
Example of an equipment purchase of $500,000 using 100% Bonus Depreciation
Purchase price $500,000
100% Bonus Depreciation ($500,000 x 100%) $500,000
Total 1st year tax deduction $500,000
Potential 1st year tax savings in the 21% tax bracket $105,000
After tax cost of equipment $395,000
This visual shows a side-by-side example of the Section 179 and Bonus Depreciation tax savings calculation.

Take advantage of Section 179 for qualifying assets

Now with Section 179, assets will not become an expense for your business. You may be eligible to pay less in taxes if assets are used within the first year. Contact your accountant or financial advisor today to find out more about the tax laws and specific benefits you may receive when acquiring equipment that is new-to-you.

*Disclaimer: DLL does not provide legal, tax or accounting advice. The customer must obtain and rely on such advice from its own accountants, auditors, attorneys, or other professional advisors. These materials are for informational purposes only. Nothing herein constitutes tax advice and customers should consult with their tax advisors prior to electing specific rates or options.