One of the many benefits to financing equipment is a potential tax write-off due to Section 179 of the IRS Tax Code. While the name alone seems intimidating and complicated (like many other tax-related issues), Section 179 is simple to understand for businesses selling and buying equipment.
What is Section 179?
Section 179 of the IRS Tax Code allows businesses to write-off the full purchase price of any qualifying piece of equipment or software in the year it was purchased or financed. For example, if a business financed $60,000 worth of equipment in 2022, they can deduct the entire $60,000 from their 2022 taxable income.
The deduction can help small to medium-sized businesses alleviate some of the financial burden of acquiring a lot of equipment or software as well as incentivize them to act quickly at the end of a tax year. This is why understanding the benefits of Section 179 is especially important in Q4 when businesses are evaluating their upcoming year’s needs and may want to push a purchase forward for the deduction.
Does my equipment or software qualify for Section 179?
A sole proprietor, partnership, or corporation can fully expense qualified tangible property the year it is purchased and put in use if the qualifying assets are used for business purposes more than 50 percent of the time.
Generally, the types equipment or software listed below qualify for Section 179. While used items can qualify, it must be new to whomever purchased it. For 2022, equipment must be delivered and in use by December 31.
Qualifying items include:
- Off-the-shelf software (meaning software that’s not customized and is available to the general public)
- Equipment purchased for business use
- Computers
- Office furniture or equipment
- Most work vehicles that can’t double as a personal vehicle, such as forklifts and trailers
- Equipment to conform to COVID-19 restrictions (sanitary stations, plexiglass dividers, temperature check stations, etc.)
Why is financing important for Section 179?
Section 179 is especially appealing to customers that finance their equipment because they gain the ability to deduct the full purchase price of the equipment or software before paying off their loan.
The deduction can significantly reduce the barriers of entry in acquiring equipment and incentivizes businesses to purchase more equipment or software throughout the year.
How do I use Section 179 to sell more equipment?
Now that you understand how Section 179 benefits your customers, it’s time to integrate it into your sales cycle. Educating your shoppers about Section 179 is a great way to incentivize your shoppers to make a purchase, particularly before the end of the year.
There are many ways to communicate the advantages of Section 179 through the distribution of promotional material, integrating it into your marketing collateral or developing an email campaign highlighting the benefits.
Speak to an expert about financing and Section 179
If you want to know more about how you and your customers can benefit from Section 179, talk to one of our industry experts. We’re happy to help.
*NewLane does not warrant that your company will qualify for an IRS 179 deductible. Qualified amount may vary. Please consult your tax advisor or accountant prior to making any decisions based upon Section 179 information. Equipment must be purchased and placed in service by 12/31/2022.