Section 179 is a tax deduction that brings significant tax savings for small- and medium-sized businesses. It does not increase the total amount the small business owners can deduct, but it allows them to take their entire depreciation deduction in one year, rather than in increments over the term of an asset’s useful life – which in some cases can be up to 39 years. This is called “first-year expensing” or “Section 179” expensing.
Qualified Equipment for Section 179
First, you need to know which of your flexo equipment is qualified for this deduction.
- Equipment purchased for business use (e.g. machines, etc.)
- Property attached to your building that is not a structural component of the building (e.g. a printing press, etc.)
- Tangible personal property used in business
- Business vehicles weighing in excess of 6,000 pounds
- Office Furniture
- Office Equipment
- Partial Business Use
- Certain improvements to existing non-residential buildings (e.g. alarm and security systems, etc.)
Beyond the machinery in the print room, it’s good to know that the software and computers that help with the digital workflow are covered as well. It is also important to note that the equipment can be purchased new or used, or “new to you”.
Annual Deduction Limit
There is hope that before year-end that Congress will reinstate the tax incentives we had in prior years, but for 2021, Section 179 allows you to write off up to $1,050,000 on flexo equipment purchased and installed by December 31, 2021. You must reduce your Section 179 deduction on a dollar-for-dollar basis for annual purchases that exceed the applicable limit of $2.62 million.
You cannot use Section 179 to deduct more than your net taxable business income for the year. If you have a net loss for the year, you cannot take the Section 179 deduction for that year. If your net taxable income is less than the cost of the property you wish to deduct under Section 179, your deduction for the year is limited to the amount of your income. Any amount you cannot deduct in the current year, you can carry forward and deduct the next year (or any other year in the future).
Consult with your CPA or Tax Advisor to see how Section 179 can help your company acquire the flexo equipment needed and save pre-tax dollars.