The growth of small to medium-sized businesses (SMBs) often requires investing upfront and continuing to invest for optimal growth and success. One of the most common ways to invest in your business is by purchasing or upgrading office equipment. While this is necessary to ensure quality and more efficient work, it’s often a significant expense. However, there are ways to make large-scale purchases fit your budget and increase your bottom line.
One way to save on new equipment, such as office printers or copiers, and large-scale digital production printers, is to use the tax advantage of the Section 179 deduction. This tax advantage allows businesses to receive significant savings at tax time by deducting qualifying business equipment and software. These savings will make purchasing equipment more affordable in 2021.
Before learning how your organization can benefit, let's discuss what Section 179 is and the general requirements.
What is Section 179?
Many people believe the Section 179 tax code is complicated. However, this thinking could lead to missing out on potential savings and benefits for your organization. The Section 179 tax code is relatively simple to understand and allows you to take advantage of investing in your business.
Section 179 is part of the United States tax code that allows for tax deductions for the cost of specific tangible property used in running a business. It is a way to help businesses by taking a depreciation deduction for certain assets, such as equipment, machinery, software, and vehicles. Rather than depreciating assets over a set number of years, investments are put into service within the first year. With a traditional depreciation deduction, assets are depreciated over their useful life to receive a tax deduction for part of the cost each year. Alternatively, Section 179 allows businesses to take the entire expense as a deduction in purchasing the first year.
On the 2021 tax return, SMBs can write off the entire cost of qualifying equipment up to $1,050,000.
General Requirements for Section 179
Qualifying business property for Section 179 is defined as tangible and depreciable personal property bought for the use of conducting a service or operating a business. The IRS outlines two general requirements for business property to qualify for Section 179 tax deduction:
- The business property needs to use more than 50% for business purposes.
- The property must be purchased and put into service the same year the deduction is claimed.
If the business property isn't used for conducting business 100% of the time, you can only take the business deduction for the percent (more than 50% required) that it is used for business. For example, if you purchase a new vehicle for business travel and only use the car 80% of the time for business travel, you can only deduct 80% of the total vehicle cost.
There are limits to this business tax deduction, so talk to your tax professional to determine how your business can take advantage of it to purchase or lease qualifying office equipment.
How Can My Organization Use Section 179?
There are many benefits of using the business tax deduction of Section 179 and a way for you to invest in your organization for long-term success. Some ways your organization can use Section 179 in 2021 include:
- Upgrade office multifunction printers for increased efficiency and production
- Upgrade scanners for a more modernized office
- Purchase digital printing presses to keep up-to-date with the latest technology and trends
- Invest in production print software to ensure the use of cutting-edge technology in your organization
Taking a Section 179 deduction is simple: purchasing qualifying property for your organization and beginning to use it. Other steps to claiming your business deduction include:
- Keeping records of the date of purchase and all costs associated with the purchase
- Talking to your tax professional to find the total property costs that are qualified
- Opting to take the Section 179 deduction by completing IRS Form 4562 and including it in your business tax return
Purchasing Printer and Copier Equipment in 2021
If you've noticed that your multifunction printer is no longer handling the high-volume print needs of your business, it may be time to upgrade your organization's printer fleet for more advanced printing options. With Section 179, 2021 could be the perfect time to upgrade and scale your in-house printing capabilities.
Editor’s Note: This post was originally published on October 29, 2020, and has been updated for accuracy and current best practices.