Most small businesses can write off the entire cost of qualifying equipment on their 2023 tax return, up to $1,160,000.
Here’s How Section 179 works:
In the past, when businesses bought qualifying equipment, they would write it off gradually over time through depreciation. For example, if a company spent $50,000 on a machine, it could write off $10,000 per year for five years.
However, most business owners would prefer to write off the entire purchase price in the year they buy the equipment. Section 179 allows businesses to do just that, allowing them to write off the entire purchase price of qualifying equipment for the current tax year.
The Section 179 deduction for 2023 is $1,160,000 (this is up from $1,080,000 in 2022). This is a full $80,000 increase from last year. This means U.S. companies can deduct the full purchase price of ALL qualified equipment purchases, up to the limit of $1,160,000. In addition, the “total equipment purchase” limit has been raised to $2,890,000 (up from $2.7 million in 2022). The deduction can include both new and used qualified equipment.
In addition, businesses can take advantage of 80% bonus depreciation on both new and used equipment for the entirety of 2023. Bonus Depreciation is generally taken after the Section 179 Spending Cap is reached.
Check out the fully updated 2023 Section 179 Calculator to see how the Section 179 tax deduction can benefit your company in 2023.
*You should always consult with your qualified accountant when it comes to your specific business tax deductions. Additional information on business taxes and Section 179 can be found at www.irs.gov.