Section 179 Summer 2022

By | August 22, 2022

Shall we check in on Section 179 now that we’re past the midpoint of 2022? 

Honestly, I feel bad for Section 179, because all I’m seeing in the news is inflation and rates. I hear about how everything costs more. But I never hear about the single best business incentive ever invented: our friend Section 179.

the Tax Extenders Bill expands the Section 179 deduction

But it’s still here in 2022, and it’s better than ever. Here are a few numbers for you:

  • The deduction is a robust $1,080,000. That’s one million, eighty thousand dollars (up 30k from 2021’s limits). 
  • The total amount a business can spend before the deduction starts to decrease is $2.7 million.

The above is simple: it means you can deduct the full price of qualifying new or used equipment, up to $1,080,000. And when you reach a total of $2.7 million spent, the deduction then decreases on a dollar for dollar basis. Most small businesses will never get near that amount spent, so this is really big. It means pretty much anything you buy for your business can be deducted 100% (almost all tangible business equipment, new or used, qualifies). 

Financing Increases Your Leverage

I’ve mentioned this “business hack” previously, but it’s well worth repeating. If you finance section 179 equipment, you will likely save more on your taxes than the total amount of your payments this year. 

Here’s an example: say you finance a piece of $100k equipment this summer. You deduct the entire thing at year’s end. At a 35% tax rate, that’s $35k off your taxes – that’s real money that stays in your bank account.

From summer to the end of the year, let’s say you pay approximately $12k in finance payments for this equipment. So you saved $35k in taxes, and paid out $12k in payments. Your net saved is $23k.   

That means the equipment technically cost you nothing this year. PLUS it made your bank account $23k larger. AND you got to use the equipment to hopefully make more revenue. Yes, this is real. 

Can you see why I love Section 179 so much, and why so many businesses use it? I never fail to bring up Section 179 when I’m talking to a business. It’s simply the best tax deduction imaginable, and it’s one every business should use every year.

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