Section 179: How it can work for you – and what’s changing 

In simplest terms, Section 179 of the IRS tax code lets businesses deduct the full purchase price – up to a set limit – of qualifying equipment financed during a given tax year. 

And that could help you buy more of the equipment you need while saving some money on your taxes.

How it works

For the tax year 2024, businesses that purchase $3,050,000 or less in eligible equipment can deduct up to $1,220,000 of that expense. 

Instead of depreciating newly acquired equipment over several years, businesses like yours can take the full deduction now and save real money on your bottom line when you purchase your equipment and placing it in service by the end of the calendar year.

Let’s say you’ve purchased a key piece of equipment for your business for $200,000. Typically, the value of this equipment depreciates over its lifespan. Normally, you’d divide the cost of the equipment by its number of expected years.

For financial statement presentation, you can capitalize your asset and depreciate that asset over its expected life.

For tax purposes, Section 179 allows you to deduct a substantial portion of an asset’s cost in the first year, reducing your taxable income and paying less tax as a result.

Once your Section 179 limit has been reached, bonus depreciation kicks in.

When the max Section 179 deduction of $1,220,000 is reached, bonus depreciation kicks in, allowing your business to deduct a substantial portion of an asset’s cost in the first year instead of depreciating the cost over many years.

What has changed

Starting in 2024, the first-year bonus depreciation deduction amount is decreasing as follows:

  • 60% in 2024
  • 40% in 2025
  • 20% in 2026

If you’re interested in getting the equipment you need into service this year – before the bonus depreciation amount decreases further – reach out to us to learn more about our financing options.

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This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation. Not all applicants will qualify for financing. All finance programs and rates are subject to final approval by First-Citizens Bank & Trust Company, and are subject to change at any time without notice.