The Section 179 deduction, established by the U.S. Internal Revenue Code, allows businesses to expense the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. This is a powerful incentive designed to encourage businesses to invest in themselves by upgrading their equipment. Instead of depreciating the asset over several years, businesses can often deduct the entire cost in the year it is placed in service, significantly reducing their taxable income for that year.
Key Concepts and Limitations
While Section 179 offers substantial benefits, it comes with specific limitations:
Qualifying Property: The deduction generally applies to tangible personal property (like machinery, equipment, computers, office furniture) and certain qualified real property improvements (like HVAC, roofs, security systems, fire protection systems). It typically does not apply to land or buildings.
Purchase Price Limit: There's a maximum amount that can be expensed under Section 179 each year. This limit is adjusted annually for inflation.
Business Income Limitation: The Section 179 deduction cannot exceed the net taxable business income of the company. If the total cost of qualifying property exceeds the business's taxable income, the deduction is limited to the amount of taxable income.
Phase-out Threshold: There's also a threshold for the total amount of equipment purchased. If the total cost of qualifying equipment placed in service during the year exceeds this threshold, the Section 179 deduction is reduced dollar-for-dollar.
Bonus Depreciation: Businesses may also be able to take advantage of bonus depreciation on top of the Section 179 deduction, though the rules and availability can change.
How the Calculator Works
This calculator helps you estimate your potential Section 179 deduction based on the key figures:
Total Cost of Qualifying Equipment: The sum of all eligible assets placed in service during the tax year.
Current Year Section 179 Limit: The maximum dollar amount that can be expensed under Section 179 for the current tax year. This is set by the IRS and is subject to change annually.
Business Taxable Income: Your business's net taxable income before considering the Section 179 deduction.
Bonus Depreciation (Optional): If applicable, the amount of bonus depreciation you intend to take.
The calculator determines the deductible amount by considering these limitations:
It first checks if the total equipment cost exceeds the Section 179 limit. The deduction cannot be more than the Section 179 limit.
It then caps the deduction at the business's taxable income.
It also considers the phase-out threshold if the total equipment purchase amount exceeds it (this calculator simplifies by not directly implementing the phase-out threshold, but the effective limit is maintained by the other constraints).
The calculator will deduct the lesser of the total equipment cost (or the Sec 179 limit, whichever is smaller) and the business taxable income.
Bonus depreciation is generally taken after the Section 179 deduction is calculated and is not directly factored into the Section 179 limit itself, but it can further reduce taxable income. This calculator focuses purely on the Section 179 component.
Disclaimer: This calculator is for informational purposes only and does not constitute tax advice. Consult with a qualified tax professional for advice specific to your business situation.
function calculateSection179() {
var totalEquipCost = parseFloat(document.getElementById("totalEquipCost").value);
var sec179Limit = parseFloat(document.getElementById("sec179Limit").value);
var businessIncome = parseFloat(document.getElementById("businessIncome").value);
var bonusDepreciation = parseFloat(document.getElementById("bonusDepreciation").value); // Bonus depreciation is not directly part of Sec 179 calculation logic here, but good to have for context.
var calculatedDeduction = 0;
// Validate inputs
if (isNaN(totalEquipCost) || totalEquipCost <= 0 ||
isNaN(sec179Limit) || sec179Limit <= 0 ||
isNaN(businessIncome) || businessIncome < 0) {
document.getElementById("result-value").innerText = "Invalid Input";
return;
}
// Determine the amount of Section 179 expense deduction
// It's the lesser of the total qualifying equipment cost, the Section 179 limit, or the business income.
var potentialDeduction = Math.min(totalEquipCost, sec179Limit);
calculatedDeduction = Math.min(potentialDeduction, businessIncome);
// Ensure deduction is not negative (though business income check should prevent this)
calculatedDeduction = Math.max(0, calculatedDeduction);
// Format the result as currency
document.getElementById("result-value").innerText = "$" + calculatedDeduction.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
}