Section 179 Deduction Calculator
Use this calculator to estimate your potential Section 179 tax deduction and the resulting tax savings for your business. Section 179 allows businesses to deduct the full purchase price of qualifying equipment or software purchased or financed during the tax year, up to certain limits.
Calculation Results:
Current Year Section 179 Deduction Limit: $1,220,000
Current Year Section 179 Spending Cap: $3,050,000
Your Estimated Section 179 Deduction:
Estimated Federal Tax Savings:
Estimated State Tax Savings:
Total Estimated Tax Savings:
Understanding Section 179 Deduction
Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. This means that if you buy, lease, or finance a piece of qualifying equipment, you can deduct the full purchase price from your gross income, rather than depreciating it over several years.
Who Can Benefit?
This deduction is primarily aimed at small and medium-sized businesses, but larger businesses can also utilize it. The goal is to encourage businesses to invest in themselves by purchasing new equipment, which in turn stimulates the economy.
What Qualifies for Section 179?
Most tangible personal property used in business qualifies. This includes:
- Machinery and equipment
- Computers and "off-the-shelf" software
- Office furniture and fixtures
- Certain vehicles (with specific weight and use requirements)
- Qualified real property improvements (e.g., roofs, HVAC, fire protection, security systems)
The equipment must be purchased and put into service during the tax year for which the deduction is claimed, and it must be used for business purposes more than 50% of the time.
Key Limits and Considerations (for 2024):
- Deduction Limit: For 2024, the maximum amount you can elect to deduct under Section 179 is $1,220,000.
- Spending Cap: There's a total amount of equipment that can be purchased before the deduction begins to phase out. For 2024, this spending cap is $3,050,000. If your total equipment purchases exceed this amount, the Section 179 deduction limit is reduced dollar-for-dollar by the amount exceeding the cap.
- Taxable Income Limit: The Section 179 deduction cannot exceed your business's taxable income. If your deduction is greater than your taxable income, you can carry forward the unused portion to future tax years.
How It Works: An Example
Let's say your business purchases $100,000 worth of new equipment in 2024. Your estimated business taxable income is $150,000, and your combined federal and state tax rate is 26% (21% federal + 5% state).
Using Section 179, you could deduct the full $100,000 from your taxable income. This reduces your taxable income from $150,000 to $50,000. The tax savings would be $100,000 * 0.26 = $26,000. Without Section 179, you would typically depreciate this equipment over 5-7 years, receiving smaller deductions each year.
Important Disclaimer:
This calculator provides estimates based on current tax laws and the information you provide. Tax laws are complex and subject to change. It is crucial to consult with a qualified tax professional or financial advisor to understand your specific situation and ensure compliance with all applicable tax regulations.