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The Belkorp Ag team did some digging to answer your questions about the Section 179 tax benefit program. Whether you’ve taken advantage of Section 179 in the past or you’re thinking about applying it to a year-end purchase, we want to make sure you’re informed and ready to take advantage of the program as best you can. Below, we will answer some of the most commonly asked questions about Section 179 for 2018.

What Is Section 179?

Many people think the Section 179 deduction is some mysterious or complicated tax code. The good news is, it’s really not! Basically, Section 179 allows businesses to deduct the full purchase price of qualifying equipment and software on their taxes. It’s an incentive for farmers and other business owners to invest in themselves with new equipment.

Who Qualifies For Section 179?

All businesses that purchase, finance, and/or lease business equipment (new or used!) during tax year 2018 should qualify for the Section 179 Deduction, as long as they don’t spend more than the maximum amount.

What Qualifies For Section 179?

Most tangible goods used by American businesses, including equipment, software, and some business-use vehicles qualify for the Section 179 Deduction.

What Is The Spending Cap?

The maximum amount of money that can be spent on equipment before your Section 179 Deduction starts to be reduced on a dollar for dollar basis is $2.5 million. 

What Is The Total I Can Deduct?

This year, the deduction limit was raised to $1 million. That’s a pretty significant increase from the $510,000 limit that was in place just last year!

What About Bonus Depreciation?

Bonus depreciation is offered some years, and some years it is not. For 2018, bonus depreciation is being offered at 100%.

Can Bonus Depreciation Be Used With Section 179?

Bonus Depreciation can be combined with Section 179 deduction for additional savings. It lets you take additional depreciation on new and used (as long as it’s new to you) capital equipment purchases. When applying these, Section 179 is generally taken first, followed by Bonus Depreciation. If the business had no taxable profit, the unprofitable business can carry the loss forward to future years.

What's The Business Use Requirement?

In order to qualify for Section 179, the equipment or software must be used for business purposes more than 50% of the time. To determine the eligible amount, you can multiply the cost of the equipment and/or software by the percentage of business use. 

When Can You Apply Section 179 For 2018?

If you want to apply the deduction for tax year 2018, you must purchase or finance the equipment between January 1, 2018, and December 31, 2018. The equipment and/or software must also be placed into service before midnight on December 31.

If you are interested in learning more about Section 179, stop by one of our 7 Belkorp Ag locations to talk to one of our experts. We would love to walk you through the program in more detail and help you make the best possible decision for your business.

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