2014 Changes in Section 179 Deduction

As one of America’s top equipment leasing and financing businesses, Taycor recognizes the opportunities that lie in Section 179 and provides small businesses with updated official details and easy to understand information regarding the tax law. There are some drastic changes coming up for the 2014 tax year and it’s important for taxpayers to be aware of these changes so they can better prepare.

What is Section 179?

Section 179 of the IRS tax code allows businesses to deduct the full purchase of qualifying equipment and/or software purchased or financed during the tax year. Meaning, if you buy or lease a piece of qualifying equipment, you can deduct the full purchase price from your gross income. It is an incentive created to encourage businesses to buy equipment and invest in themselves. Today, millions of small businesses are taking action and getting real benefits from Section 179.

The following lists some of the most important details for the 2014 changes.

  • 2014 Deduction Limit = $25,000 (New and Used Equipment, as well as Software).
  • 2014 Limit on Equipment Purchases = $200,000 (This is the maximum amount that can be spent on equipment before the deduction available to a company begins to reduce).
  • 2014 Bonus Depreciation = EXPIRED

In 2014 the Section 179 expensing limits are expected to restore to its original limits of $25,000 while investment limits fall to $200,000. This is a significant retreat in comparison to the $500,000 expensing limit and $2,000,000 investment limit that taxpayers had available between 2010 and 2013. In previous years, qualified real property was eligible for Section 179 expensing, however that rule currently has not been extended. Starting in 2014, qualified real property will not be eligible for Section 179 expensing.

In addition to the Section 179 expensing limits, bonus depreciation will expire as well. Taxpayers have expected it to expire in previous years and Congress has continued to extend it, but it looks like bonus depreciation is coming to an end.

Although these are drastic deductions in comparison to what Section 179 presented in 2013, businesses can still take advantage of the law’s benefits. All businesses that purchase, finance, or lease less than $200,000 in new or used business equipment during the 2014 tax year should qualify for the Section 179 Deduction.

How to take the Section 179 Deduction?

Section 179 Deduction is not automatic. If you are a small or medium-sized business owner who has purchased, financed, or leased equipment in 2014 and placed it into service during the year, then you need to elect to take the Section 179 Deduction to ensure that your business captures the available tax savings.

You can elect to take the deduction when you file your tax return for the year. To do this, you simply fill out Part 1 of IRS form 4562 and attach it to your tax return. The form is available for free at the website listed above or your tax preparer can easily take care of the form for you. As mentioned previously, most equipment and software is going to qualify for the Section 179 Deduction. You can verify your equipment by reviewing the list on the Section 179 website.

To get the deduction for 2013, you must act this year. Once December 31, 2013 passes, Section 179 can’t increase your 2013 profits anymore.

Does purchasing instead of leasing equipment create greater advantage of Section 179?

No, companies can lease equipment and still take advantage of the Section 179 Deduction. Leasing equipment or software with the Section 179 Deduction is a preferred strategy for many businesses because it can significantly help with both cash flow and profits. Inevitably, the amount you deduct will exceed your cash outlay for 2014 when you combine a properly structured Equipment Lease or Finance Agreement with a full Section 179 Deduction. You can deduct the full amount of equipment or software without paying the full amount this year. The amount saved in taxes can actually exceed the payments. In other words, the deduction will actually be more profitable.

How can Taycor help?

Taycor understands the importance of Section 179 and wants to help its businesses take advantage of the opportunities of 2013. Taycor is a fiscally sound and economically responsible partner for all your equipment leasing needs. The company specializes in all types of new or used equipment, vehicles, or software purchases from $5,000 up to $5,000,000. Go to http://www.taycor.com to use an instant calculator and estimate your tax savings on your 2014 equipment purchases.