IRS Tax Code Section 179


The internal revenue service (IRS) of the section 179 code is a bureau under the department of treasury. It is concerned with the coercion of income tax law. Besides, the IRS is responsible for determining the pension-plan conservations. Even more, the IRS ensures that it offers guidance on how US citizens should comply with the tax laws. In case there are questions from taxpayers, it also answers them. A lot of Americans have limited interactions with the IRS towards the submission of a federal tax return annually.

However, the IRS plays a big role and much more than emailing refunds or collecting money. It plays a big role in ensuring that the government is achieved by collecting revenue that is required to fund important programs and services. In as much as the IRS does a lot in ensuring the government is possible, there are still other Americans who don’t regard it as helpful. A 2018 Rasmussen report survey shows that 42% of Americans have negative opinions towards it. Many citizens should consider it useful and helpful because the US government created it mainly to encourage businesses to purchase different equipment so that they can invest in themselves. It is section 179 of the IRS code that allows different businesses to deduct the purchase price of their qualifying equipment. From a realistic point of view, it can be deduced that the 42% who don’t support IRS do that because most citizens don’t like issues with paying tax. There are even bigger companies, all over the world, that get shut down due to tax evasion.

The bottom line here is, every American should realize and acknowledge how IRS helps in ensuring the proper and effective functioning of the government. What does the IRS do? If you’ve ever wondered what’s so special or what is it that the IRS does to the US government then here is the answer to that puzzle.

1. Processing federal returns tax returns and collecting revenue. Back in 2017, the IRS processed more than 245 million tax returns. In gross taxes, the IRS collected more than $3.4 trillion.

2. The IRS administers tax laws by offering guidance and issuing regulations.

3. It assists taxpayers by making them understand their tax obligations and comply with them. This is achieved by providing helpline. Some numbers can be used by individuals, companies, organizations, and even people who live outside the US to call where they have access to assistance.

4. Enforcement of tax laws. There is a lot that gets done by the IRS in ensuring that tax laws are enforced. For example, criminal investigations can be conducted against people and businesses that take part in fraudulent activities. If you attempt to evade tax, IRS would conduct a civil action against you or refer that case in a criminal court for prosecution. All those responsibilities and functions of the IRS aim one thing in common, that is ensuring all Americans’ taxpayers have access to top-notch services through inducing a friendly atmosphere that will enable them to understand their responsibilities as taxpayers while fairness to all is not an exemption.

Who is right for the IRS tax code section 179?

Businesses that are in the following situations are the ones right for section 179.

1. Starting up businesses. As a starting business, owners usually have a bunch of stuff to buy in the early years of their business such as; furniture, machinery, computers and other assets that will serve them for long, long-lived assets. To keep taxable income lower that would result in lower taxes, the deduction of the full cost of the assets would be required.

2. Simplifying bookkeeping. You will not be required to capitalize on asset purchases and depreciate them for some years. All you will be required to do with section 179 deduction is recording the asset purchase as an expense.

3. Business owners facing high taxes. To experience bigger tax savings, business owners can take the section 179 deduction.

Businesses that want to maximize section 179 deduction are recommended to use virtual bookkeeping services. A good recommendation is Bench since they work with companies of almost all sizes and they are affordable. They always work with you and coordinate with your tax professional. That ensures you have a full advantage the tax deductions you qualify for, with section 179 deduction. If you want to visit Bench and get their services that only start at $95 per month, follow this link (This is just a suggestion, Zena Financial Services is not in any way affiliated with Bench).

How does the financing equipment apply to the IRS tax code section 179?

Equipment financing refers to the use of a lease or a loan to purchase or even borrow hard asset(s) intended for a business. It’s a type of financing that is can be used to borrow or purchase any type of physical assets such as a company or any other related stuff. The key thing to know of which everyone should is the fact that this type of financing is only for physical assets. This is because some people may attempt to default on paying a loan or lease. If it happens so, lenders will easily repossess the asset. So, how does equipment financing apply to IRS tax code section 179? When a business or an individual purchases an asset, IRS tax code section 179 will have to deduct tax from the qualifying product or asset. When you buy/purchase a piece of qualifying equipment, sometimes the depreciation is written off a little. For example, if the qualifying equipment that you purchased cost $25,000, The IRS will allow 100% written off of the purchased equipment.

In a nutshell, a breakdown of the IRS with a 21% corporate tax and an equipment cost of $1.5 million will be as follows; > $1 million – IRS tax code section 179 > $500, 000 – 100% bonus depreciation > $1.5 million – total for the first year deduction > $315,000 – federal cash savings > $1.185 million – a lowered cost of the equipment. One good tax benefits that a business can experience is the optimization of operating costs; if tax planning is executed carefully plus a personalized combination of the IRS section 179, it is easy to benefit much from your business. For example, if you come up with a net operating loss for your business through bonus depreciation, you can easily revisit previous years where you made profits and claim a refund. It turns out that many businesses opt for writing off the whole equipment buying price for the year they purchase it. If the entire amount is written off by a business, there are high chances that the business would add/purchase other equipment that year and not wait for the few next years. That is the main purpose of IRS section 179; it aids motivate your economy.

Section 179 has a lot of benefits to businesses but it too has limitations; your business can spend a maximum of $2.5 million. Difference between IRS tax section 179 and bonus depreciation Bonus depreciation is not offered every year, sometimes it is available while others absent. In 2019, 100% bonus depreciation is available. The big difference that exists between the two is that section 179 allows both new and used equipment. On the other hand, the bonus depreciation only covers new equipment. For businesses that spend more than the IRS section 179 limit, $2.5million, bonus depreciation is a great choice for them. In the next section, a brief summary of the main qualifications of 179 is discussed.

You should be acquiring the equipment or item intentionally for business or trade purposes.  If you acquire a piece of equipment for both personal and business use, you are recommended to claim the section 179 deduction. However, this applies only if you utilize the item more than 50% of the time for your business in the literary in the year you put it in service. To calculate your section 179 deduction, you have to multiply the cost of the item/equipment by the percentage of business use. > You must have acquired the item through purchase. This qualification again brings the relationship between the IRS tax section 179 and equipment financing. That is because acquiring an item through purchase can involve equipment financing or credit acquiring.

Section 179, like equipment financing,  can only be used when the item is physical or tangible. It can be:

1. Machinery and equipment.

2. Off-the-shelf computer software.

3. Storage tanks and pipes.

4. Properties that are attached or contained in a building like refrigerators, printing presses, grocery store counters and many more.

Here are the types of equipment do not qualify:

1.  Equipment that will later be leased to others.

2.  Equipment that you acquired in different ways rather than the recommended once such as items you acquired through inheritance or gift.

3.  Equipment purchased from a relative or just a family member may also not be required.

4.  Heating units and air conditioners.

5.  Equipment acquired through a lease is also not allowed.

More so, if your business will not be in a position of owning the item at the end of the lease term. Now that you are informed and at least you’ve known something new about section 179, claim the section 179 deduction and experience what it can do to your business. It will definitely grow, reach higher levels and leave you in a strong feeling of nostalgia towards the days you had not given it a try.

Here at Zena Financial Services, we are not tax experts, but are sharing some potential benefits to purchasing equipment for your business.  Please consult your tax advisor to see if your purchases will qualify for IRS Code Section 179.

Need more help? Contact us!

Related Blog

Leave a CommentYour email address will not be published.