Equipment Financing: Limit for IRS Section 179 deductions increased¹

Equipment Financing: Limit for IRS Section 179 deductions increased

In December 2015, Congress approved legislation permanently extending the $500,000 Section 179 limit and the $2 million overall investment limit. The new legislation allows businesses to use Section 179 to deduct the cost of qualifying equipment acquisitions up to $500,000.  What this means is that every year, companies may be able to expense the cost of the equipment acquired that year rather than depreciate it.  The increase of the Section 179 deduction provides substantial tax benefits to companies that acquire capital equipment.

A Sale-Leaseback financing product offers companies who paid cash for equipment within the last six months an opportunity to be reimbursed for that purchase and spread the equipment cost over time via a capital lease structure ($1 buyout).  This is a great way to improve working capital and cash flow while still preserving the Section 179 deductibility.  Consider this structure prior to filing tax returns.

This new legislation increasing the annual limit to $500,000 and the investment threshold to $2 million will apply for tax year 2015. The IRS Section 179 depreciation schedule allows rapid depreciation of certain assets acquired.  Please consult your tax advisor or accountant for additional information.

Learn More about equipment financing options available from Union Bank.