And hopefully, you’re planning to use Section 179 for 2018. Because like all years, the Section 179 tax deduction will expire at midnight on 12/31. And for 2018 (and beyond), the deduction is a cool one million dollars.

The expanded limits (thanks to 2017’s Tax Cut and Jobs Act) really helps small businesses. And the fact that Section 179 is going to be here year after year helps as well – it essentially assures that you can continually buy (or finance) equipment, year after year, and take the full price of the equipment as a deduction.

At the risk of sounding too self-congratulatory, the above is a bit profound, because Section 179 is changing the way many small and medium companies operate. It makes buying equipment easy, and far more affordable, and means they can upgrade equipment faster. Many companies are planning on buying yearly equipment for as long as this ride lasts. I don’t blame them.

This has a circular effect, because when a company upgrades equipment, the “replaced” machinery typically goes into the used equipment market. This influx of good used equipment helps smaller companies just starting out. I see it all the time – a three-year-old tree removal company that’s mildly profitable makes a big jump and finances a used crane and a second bucket truck, instantly increasing their service level tenfold. That’s how you grow.

The really neat part is the equipment gets to take the Section 179 deduction multiple times. The company that originally bought the equipment takes the deduction when they buy it, and when they sell it, the new owner also takes a Section 179 deduction on the same piece of equipment (albeit at the used price, of course).

So here’s your reminder – you have until midnight December 31st to buy (or finance) equipment, and get it into service (getting a vehicle registered, installing the machine and turning it on, etc.) Then you can take your Section 179 deduction for 2018.

Happy shopping, and we’ll see you in 2019.

As you probably know, Section 179 (the “buy equipment and get a sweet tax break” tax deduction) got a nice boost this year. In fact, the maximum deduction this year has been raised to 500k. That’s five hundred thousand dollars that you can deduct from your company’s income this year (assuming you buy that much equipment, of course).

Here’s the upside for you – no matter what type of company you are, you use equipment in your business. Machinery, vehicles, tools, software, office machines, chairs, tables, store fixtures… you name it.

Knowing this, it’s almost a given that there is some type of equipment in your company that could use an upgrade. And, as any smart businessperson knows, good equipment is profitable. Even something that is not “obvious”, like new chairs and desks, can have a marked effect on employee productivity.

With all of this said, there’s 500,000 reasons why you would want to buy new (or new to you) equipment THIS year. The deduction is good only if you buy and put the equipment into service by midnight, 12/31/2013. After that, you have to go by whatever rules Section 179 will follow for 2014. And there’s a good chance it’s not the same “half a million” number (if you look at the history of Section 179, you’ll see it has varied quite a bit over the years.)

So the time to act is 2013, and, as the autumn air tells us, 2013 is fast drawing to a close. So again, this is my reminder to all businesspeople – the Section 179 deduction is super-generous this year, and it definitely should be taken advantage of.  It’s a “use it or lose it” proposition, so Fletch suggests you definitely look around your company and see what could use an upgrade. You Uncle Sam will reward you handsomely for doing such.

Hi Fletch,

I’ve been reading you for three years now, and I notice you go on and on about Section 179. You’re saying get it now, because it might go away. You cheer when it gets renewed, and you moan when it goes down, again and again. Rinse/repeat.

So my question is this: Why doesn’t the government just make a number for Section 179, and leave it alone? Why the constant game and tweaking and “will they or won’t they”?

John

Hi John,

Thanks for the note, and thanks for reading the blog.

You know, that’s not a bad question on the surface, but I think if you look at just why Section 179 is even here, the answer presents itself.

See, Section 179 is meant to be a stimulus for the economy. A gift to businesses, if you will. But it’s a gift to get them to spend (after all, it’s meant to spur spending on business equipment.) And a lot of people benefit from it – businesses who buy equipment, businesses who make equipment, and equipment financing / equipment leasing companies who lend the money for it. And accountants love it too.

But if Section 179 were just left at a static number year after year, there would be no rush to use it. There’d be no “we’d better buy equipment THIS year, because we want the big Section 179 deduction”. It just wouldn’t be special. So that’s why (I think) they keep playing the game, as you call it – it’s to keep businesses guessing, and hopefully, spur spending just when the country needs it.

So by keeping Section 179 as a year to year thing, and by keeping businesses somewhat in the dark as to future plans, it does exactly what the government wants it to do – increase business spending now.

Does that make sense?

• I wish for a better 2013 in terms of the economy. Listen, I know things have been rough, and I know some people think we’re slowly recovering, but the fact is, for many companies, business is fairly stagnant. I really would like to see a better 2013 in an overall sense.
• Section 179 getting a boost in 2013 would be really nice. Right now, it’s sitting at $125,000 as the maximum amount you can deduct, and that’s going to fall to $25,000 in 2013 (so again, take note and buy now if you want to take advantage of it). I really hope our leaders see that $25,000 just isn’t going to cut it and give Section 179 a nice bump up in 2013. They’ve done it before.
• “Hey, your insightful Facebook post has made me change my political position” said no one ever. So I want politics to “stop”. I don’t mean just them – I mean “us”. I’m tired of every conversation (online and off) getting political, and everything becoming “left or right”. Wishful thinking, I know, but hey, it’s my wish list. If you notice, I lead by example here – I am decidedly un-political in this blog, and am more interested in financial / business issues than any particular party.
• I want the new Halo game. I’d buy it myself, but Mrs. Fletch puts the kibosh on buying this time of year. Hopefully Santa (or Mrs. Fletch – same thing) is listening.
• I want technology to keep moving forward. I’m excited about how things have progressed over the last few years, and I’m impressed with smartphones and their capabilities. I’d like to see things move further (an equipment financing / equipment leasing app? Be still, my beating heart!)
• Section 179 again – I wish everyone who reads this and is thinking about Section 179 to just go ahead and use it for 2012. Because despite my earlier wish, a boost for next year is not a given.

Hope you folks are enjoying the holiday season so far. It’s a great time of year.

So here’s what this means – if you want that fat Section 179 tax deduction to bolster your 2011 bottom line, you only have a few days left to buy your equipment and get it into service (that last part is key – you can’t buy the equipment now, then let it sit while you indulge in holiday celebration, meaning to unpack it the first week of January. If you do that, it’s too late.)

I’ve posted before about businesspeople frantically spending money on 12/31 to take advantage of Section 179, but I really don’t advocate that. You should do it a little earlier. Like right after you are finished with this post.  This gives you enough time to buy your equipment, and put it into service. It also gives you enough time to arrange for equipment financing or an equipment lease (which, as readers of this blog know, combined with Section 179 is a powerful profit-booster.)

Section 179 is big enough to make a difference for 2011’s year-end numbers, too. With the maximum deduction at a very generous $500,000 (that’s 500k, or a half mil, if you prefer slang), many companies can turn red ink to black by using this deduction. And with the economy hopefully gaining a little steam (reports of holiday sales are indeed encouraging), making 2011 better can be a very attractive option in a big-picture sense. Also, while Section 179 seems to be set for 2012, things could always change (it is an election year, after all). So making 2011 better (striking while the iron is hot) is probably a good move.

Anyway, I’m off for some holiday cheer. I hope you have a great holiday season, and we’ll talk again in 2012.