The Easy Way to Think About Section 179

By | October 28, 2019

As you know, I write about Section 179 a lot. Because it’s an excellent way for businesses to acquire equipment, and can really save a company a lot of money.

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But sometimes, I get frustrated with how Section 179 is often presented. I’m a plain-language guy, and once something starts to sound too much like an advanced-level economics course, most people (including myself) tend to tune out.

So when I see Section 179 called an “accelerated depreciation schedule” like I did the other day, it makes me roll my eyes. 

Ok, technically, that’s what it is, because under “non-Section 179” circumstances, you depreciate a piece of equipment yearly until the value reaches zero. Section 179 lets you depreciate (aka write off) the entire purchase price right now. 

But calling it an “accelerated depreciation schedule” sounds like the title of a school assignment that you put off until the last minute. Can’t we find a better way to think about it?

Here’s how I like to present Section 179: It’s a discount on your purchase. 

Because you write off the entire purchase price as a deduction, the discount equals whatever your tax rate is. We can conservatively say 24%. But it can be 32% or even 37% – again, whatever your tax rate is, that’s your discount.

If you buy a 100k piece of equipment, you write off 100k on your taxes. At (say) a 24% rate, that means you save a cool 24k on your taxes.  These are real dollars that you get to keep (that you would have otherwise paid), so it’s exactly like getting a 24% discount.

Imagine this. You need a new widget. The new widget will greatly help your business. So you go to the widget-maker and negotiate a great price on a new widget. Then the widget-maker says “buy it now, and you’ll get another 24% off”.

You’d jump at that, wouldn’t you?

That’s Section 179 right there. It expires for 2019 on 12/31, meaning you have roughly two more months of it this year, so take advantage.

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