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Depreciation and Section 179 deduction

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Depreciation section 179 of the IRS code states that businesses that purchase or finance qualifying equipment or software can deduct the full purchase price from the gross income. This incentive was created by the U.S. government to encourage businesses to buy equipment and invest in themselves.

Who Qualifies for Section 179?

All businesses that purchase, finance, and lease less than $200,000 in new or used business equipment during tax year 2015 qualify for the Section 179 Deduction. Most goods including “off-the-shelf” software and business-use vehicles qualify. The equipment and/or software purchased or financed must be placed into service during 2015.

The deduction begins to phase out if more than $200,000 of equipment is purchased – in fact, the deduction decreases on a dollar for dollar scale after that, making Section 179 a deduction specifically for small and medium-sized businesses.

To summarize:

2015 Deduction Limit = $25,000

This deduction is good on new and used equipment, as well as off-the-shelf software. This limit is only good for 2015, and the equipment must be financed/purchased and put into service by the end of the day, 12/31/2015.

2015 Spending Cap on equipment purchases = $200,000

This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced on a dollar for dollar basis. This spending cap makes Section 179 a true “small business tax incentive”.

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