But seriously, I say it all the time – use Section 179 before it goes down, or even goes away. And while you’re at it, combine it with equipment financing to really get some bang for your buck. Over and over I say it, and I always warn that the gravy train may end.

Well, this time it did. Did you listen to me? Did you take advantage of Section 179 before the New Year? Because if you didn’t, you lost out. The Section 179 deduction WAS $500,000 for 2011. But you know how much it is in 2012?  $139,000. Yes, it went down that much (don’t yell at me – I had nothing to do with this – hey, I tried to warn everyone!)

But here’s the good news – that’s still a heck of a deduction. And it’s for 2012 only. In 2013, Section 179 is scheduled to go down even MORE – all the way down to $25,000. And it’s an election year – the politicians have a lot more to do this year than worry about amending Section 179, so there’s a good chance this is going to stay just like it is (in these times, with things like Occupy Wall Street going on, do you think business deductions will be all that popular with people? I know Section 179 is a good thing, but it can easily be twisted to be seen as helping wealthy people – after all, it’s still sometimes known as the “Hummer Tax Break”.)

So here’s my advice – take advantage of Section 179 THIS year. Don’t miss out again. Call an equipment financing company, get yourself an equipment lease, buy some equipment, and write it off. Take advantage of the six-figure tax deduction while it’s still here.

Have a great day, everyone!

Hey Fletch,

Forgive my ignorance, but you keep calling Section 179 a tax deduction, while you called the ITC a “tax credit”. What is the difference (if any)?

Good question – a lot of people get confused by this, as they are definitely different. Here’s how they both break down:

A Tax Deduction (like Section 179) is deducted from the total income you get taxed on. In other words, you pay tax on income. A tax deduction reduces the income you pay tax on.

A Tax Credit does not affect the income you pay tax on, but comes right off the tax owed.

To further illustrate the difference, let’s show the difference on an equal number. Here’s how a $5,000 tax deduction and a $5,000 tax credit affect a $100,000 taxable income (assume a 25% tax rate).

As you can see, in equal amounts, a tax credit usually has a little more bang. However, it is rare to see substantial tax credits, while it’s quite common to see substantial tax deductions. For example, using Section 179, it’s pretty easy to hit six figures in deductions.

I don’t want anyone to think one is “better” than the other, because they aren’t – you should be taking advantage of every tax deduction and tax credit available to you. This means the ITC (if it ever comes back), and, of course, Section 179. Which brings me to:

My Section 179 Addendum

This is an addendum I’ll be adding to my posts for the rest of the year. That’s because it’s getting later in the year, and Section 179 for 2010 ends soon. If you want that new piece of equipment, and also want to take advantage of the new, higher limits, NOW is the time.