Section 179 Deduction Limits for 2021:
The Section 179 deduction limit for 2021 is $1,050,000. This means your company can deduct the full cost of qualifying equipment (new or used), up to $1,050,000, from your 2021 taxable income. This deduction is good until you reach $2.62 million in purchases for the year.
Section 179 is Meant for Small and Mid-sized Companies
Section 179 helps small and mid-sized companies invest in themselves. The full $1,050,000 deduction can be claimed up to the $2,620,000 equipment purchases limit. Once that number is reached, the Section 179 deduction decreases dollar-for-dollar, and reaches zero once $3,670,000 worth of equipment is purchased/financed.
This is why we say it’s for small and mid-sized companies, as most will not reach that spending limit.
About the Section 179 Deadline
The Section 179 deduction has proven wildly popular with small and mid-sized companies. But there is a deadline: to use the deduction for 2021, the equipment must be purchased/financed, and put into service by 11:59 pm, 12/31/2021.
A Look Towards the Future
The Section 179 Tax Deduction was made permanentseveral years ago. However, there is typically a small inflation-adjusted increase annually. For example, it was $1,040,000 in 2020, and is now $1,050,000 for 2021. This is good news, because many companies count on this excellent tax deduction yearly.
Qualifying Property for Section 179:
- Most tangible business equipment (both new and used) will qualify for the deduction. This includes production machinery, computers/printers, office furniture, copiers and other office machines, signage, shelving, storage tanks, and most other general equipment.
- Commercial use vehicles will usually qualify. This means vehicles with seating for 9+ passengers, a 6’ cargo area, or a fully enclosed cab-over driving compartment.
- Passenger vehicles exceeding 6,000+ pounds GVW (gross vehicle weight) will usually qualify, however, they are usually limited to a $25,000 deduction.
- “Heavy equipment” qualifies.
- Section 179 is good for software as well. The caveat is the software must be available for purchase by the general public, and carry a non-exclusive license, without custom modifications. This means operating systems, common office suites, common graphics programs, and similar will qualify. This does not include website and/or apps.
- Many storage structures (such as those used for agricultural purposes) will qualify. This will not include your “main” building.
- Many building improvements like HVAC, alarm and/or fire systems, roofs, and similar can qualify. As we stated earlier, used/preowned versions of the preceding (save for software of course) will generally qualify for Section 179.
- If you have questions regarding Section 179 eligibility of equipment you wish to lease or finance, you can always contact us, or reference IRS Publication 946.
