2021 Section 179 Deduction Calculator & Guide For Equipment
Section 179 Deduction is one of the most popular tax programs, and it is targeted specifically at benefiting small and medium-sized businesses. This provision allows companies to deduct the full purchase price of qualifying equipment or property in the year it was bought, rather than spreading the deduction over several years through depreciation.
The Section 179 Deduction is a powerful tool designed to encourage business investment. It’s particularly useful for businesses that need to upgrade their machinery, vehicles, or other operational assets. By reducing taxable income immediately, it helps improve cash flow and supports growth.
Under normal tax accounting, long-lived capital assets like heavy machinery are depreciated over many years. This means only a portion of the cost is deductible each year. Section 179 changes this by allowing businesses to expense the entire cost upfront, providing immediate tax savings.
The deduction limit for Section 179 has increased over time to account for inflation. For example, in 2023, the maximum deduction is $1,050,000, with a threshold of $2,620,000 before the benefit starts to phase out. Once total purchases exceed $3.67 million, the deduction is no longer available.
Many businesses take advantage of Section 179 during the fourth quarter to optimize their tax strategy. This is especially true in industries like construction, agriculture, and manufacturing, where large equipment purchases are common.
One of the main benefits of Section 179 is that it gives businesses more control over their cash flow. Instead of waiting years to see a return on investment, they can use the tax savings right away to reinvest in their operations, hire more staff, or expand their services.
While Section 179 is a major incentive, it’s not the only one. Bonus depreciation is another tax break that can be used alongside Section 179. Tax professionals often recommend using Section 179 first, then applying bonus depreciation to the remaining balance.
Our team at Equipment Radar created a free spreadsheet to help you calculate your Section 179 Deduction. You can download it in Excel or Google Sheets format and customize it based on your business needs.
Here are the links:
We recommend downloading the Microsoft Excel version so you can edit the spreadsheet. The view-only versions are limited and cannot be modified. Look for the light green cells, which are the ones you should update with your business information.
To qualify for Section 179, a business must not spend more than $3.67 million on qualifying equipment in a single year. The deduction itself is capped at $1.05 million, but it begins to phase out once total purchases reach $2.62 million.
The IRS provides a visual chart showing how the deduction decreases as purchases increase. This makes it easier for businesses to plan their investments strategically.
It's important to note that the Section 179 Deduction resets every tax year. If you exceed the threshold in one year, you might consider splitting your purchases across two years to maximize your deduction.
Always consult a tax professional to ensure you're following the latest rules and making the most of your deductions.
The IRS provides detailed guidelines for Section 179 Deduction. These include forms, publications, and official guidance. It's crucial to review these documents annually since tax laws can change from year to year.
Most tangible property used in a business qualifies for Section 179, including machinery, vehicles, furniture, and equipment. Intangible property such as software and patents may also qualify.
To be eligible, the property must meet the following criteria:
Vehicles, especially SUVs, are subject to specific limits. For example, the deduction for heavy SUVs is capped at $25,900 for 2023.
Land itself is not depreciable because it doesn't wear out or lose value over time. However, certain land preparation costs—like landscaping or grading—can be depreciated if they’re closely tied to other depreciable assets.
The IRS has specific rules for SUVs and other on-road vehicles. Heavy SUVs are subject to a cap on the Section 179 deduction. These vehicles must be primarily used for business purposes and meet weight requirements.
If you buy a used Caterpillar D8 crawler dozer for $150,000 and use it 100% for business, you can deduct the full amount under Section 179.
If you use a tractor 80% for business and 20% for personal use, you can only deduct 80% of the cost.
The business that owns the equipment can claim the deduction, not the renter. However, the renter may still deduct the full rental expense as a business cost.
Whether new or used, an excavator costing less than $1.05 million can be fully deducted under Section 179.
Transportation costs can often be included in the acquisition cost of the crane, allowing for a larger deduction.
This blog post is for informational purposes only and does not constitute tax advice. Always consult a qualified tax professional for guidance on your specific situation.
Laws and regulations change frequently, and it's essential to stay updated on the latest IRS guidelines.
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What Is Section 179 Deduction?
Section 179 Deduction Calculator
Calculator Directions
Understanding Deduction Limitations
Historical IRS Section 179 Deduction Levels
Year
Section 179
Deduction
Deduction
Limit
2023
$1,050,000
$2,620,000
2022
$1,080,000
$2,700,000
2021
$1,050,000
$2,620,000
2020
$1,040,000
$2,590,000
2019
$1,000,000
$2,500,000
2018
$1,000,000
$2,500,000
2017
$500,000
$2,000,000
2016
$500,000
$2,000,000
2015
$500,000
$2,000,000
2014
$500,000
$2,000,000
2013
$500,000
$2,000,000
2012
$500,000
$2,000,000
2011
$500,000
$2,000,000
2010
$500,000
$2,000,000
2009
$250,000
$800,000
2008
$250,000
$800,000
2007
$125,000
$500,000
Specific IRS Guidelines (Publication 946)
Where To Find IRS Forms & Official Guidance
What Equipment Qualifies?
Land / Farmland
Sport Utility Vehicles (SUVs) & Other On-Road Vehicles
Section 179 Examples For New & Used Heavy Equipment Purchases
Example 1: Used Construction Crawler Dozer Purchase
Example 2: Compact Tractor Purchase Used For Business & Personal Purposes
Example 3: Power Generator Equipment Rental
Example 4: New John Deere 870G Construction Excavator Purchase
Example 5: Purchase A Used Grove Crane Over 2,000 Miles Away
Important Note
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