Taking advantage of IRS “GIFTS”
December 2020
Although the current pandemic has caused many businesses to suffer there are others that have thrived. While I hope those that were hurt were able to obtain low-interest loans as well as PPP monies that mostly will be forgiven there is also government incentives available for those that are looking for an extra deduction due to unanticipated income in 2020. This tool is Section 179 of the US internal revenue code.
What is Section 179?
Section 179 of the U.S. IRS code is an immediate expense deduction that business owners can take for purchases of depreciable business equipment instead of capitalizing and depreciating the asset over a period of time. The Section 179 deduction can be taken if the piece of equipment is purchased or financed and the full amount of the purchase price is eligible for the deduction.
KEY TAKEAWAYS
- Section 179 of the IRC allows businesses to take an immediate deduction for business expenses related to depreciable assets such as equipment, vehicles, and software.
- This allows businesses to lower their current-year tax liability rather than capitalizing an asset and depreciating it over time in future tax years.
- Section 179 expense deduction is limited to such items as cars, office equipment, business machinery, and computers.
- SUV’s over 6,000 lbs. do qualify up to $25,000, but if bonus depreciation is taken there is no cap.
In other words....
Taking the cost of the equipment as an immediate expense deduction allows the business to get an immediate break on their tax burden whereas capitalizing then depreciating the asset allows for smaller deductions to be taken over a longer period of time. The Section 179 expensing method is offered as an incentive for small business owners to grow their businesses with the purchase of new equipment. Note that any qualifying purchase must be used at least 50% for business purposes.
As always, every business owner should talk with their own accountant to see how much savings they might personally experience. You can also go to www.section179.org/section_179_deduction/ for more information.
Please don’t hesitate to call or write with questions as information, help, and counsel is free. I always appreciate the opportunity to work with you and appreciate very much those of you that have entrusted me with your financing needs.
Have a great month,
Tim
Famous Quotes
"The only courage that matters is the kind that gets you from one moment to the next."
Mignon McLaughlin
Did You Know???
Random Facts About Numbers
- The word "hundred" is actually derived from the Old Norse word "hundrath," which actually means 120, not 100. More specifically, "hundrath," in Old Norse, means "long hundred," which equals 120, due to the duodecimal system. But good luck trying to argue that your $100 bill is worth 20 percent more than it is.
- There Is Only One Even Prime Number: "2"
- The Square Root of Two Is Called "Pythagoras' Constant."
- Zero Is the Only Number That Can't Be Represented In Roman Numerals
- Roman Numerals Were Invented as a Means of Trading
- There Is Only One Number Spelled With the Same Number of Letters as Itself. Can you guess which one? Well, It's 4. Oh, and the number 4 on a calculator is made up of four light bars.
Just for Laughs!
Upon finding a clearly plagiarized paper, I called the student into my office. Pointing to my computer screen, I said, “I found your entire paper online. Do you have anything you want to say about that?”
Her angry response: “Well, I paid my sister to write it, but I didn’t think she’d plagiarize!”