Guide to Saving Money by Using Section 179 Tax Deduction

Who doesn't want to save money on business purchases? As peak season is quickly approaching, many ISP contractors are searching for step vans to add to their fleet. This article provides a guide to saving money by using Section 179 Tax Deduction. Why not save money on a needed business purchase? Let’s explore a bit more about Section 179 and review some tips on how to optimize the tax deductions for your business.

What is Section 179?

According to Section179.org, Section 179 of the IRS Tax Code allows a business to deduct, for the current tax year, the full purchase price of equipment and off-the-shelf software that qualifies for the deduction. This equates to up to $1 million dollars in eligible equipment to be deducted, and the ‘total equipment purchased’ by a business cannot exceed 2.5 million in the current year (2019). Once the equipment purchased exceeds that number, the deduction reduces on a dollar for dollar basis.

When does the purchase need to be made to qualify?

The equipment must be purchased (or financed / leased) and placed into service between January 1 and December 31 of that year.

How Much Can An ISP contractor Save on Taxes in 2019?

This depends on the amount of qualifying equipment and software that the ISP contractor purchases and puts into use. Section 179 suggests a helpful calculator that will easily calculate your potential savings: https://www.crestcapital.com/tax_deduction_calculator?_ga=2.137708656.1168323662.1568993625-600756634.1512153110

What type of Equipment Qualifies?

Most tangible business equipment qualifies, as long as it was purchased between January 1 and December 31 of the tax year you are claiming. Examples of qualifying purchases includes:

  • Equipment (machines, etc.) purchased for business use
  • Tangible personal property used in business
  • Business Vehicles with a gross vehicle weight in excess of 6,000 lbs
  • Computers
  • Computer “Off-the-Shelf” Software
  • Office Furniture
  • Office Equipment
  • Property attached to your building that is not a structural component of the building (i.e.: a printing press, large manufacturing tools and equipment)
  • Partial Business Use (equipment that is purchased for business use and personal use: generally, your deduction will be based on the percentage of time you use the equipment for business purposes).
  • Certain improvements to existing non-residential buildings: fire suppression, alarms and security systems, HVAC, and roofing.

On the other hand, here is a list of non-qualifying purchases to keep in mind when utilizing Section 179 tax deductions:

  • Real Property, which is typically defined as land, buildings, permanent structures and the components of the permanent structures (including improvements not specifically covered on the qualifying property page). Other examples of property that would not qualify for the Section 179 Deduction include paved parking areas and fences.
  • Property used outside the United States
  • Property that is used to furnish lodging
  • Property acquired by gift or inheritance, as well as property purchased from related parties (ex: you can’t sell equipment to yourself and qualify)
  • Any property that is not considered to be personal property

Related: The IRS issued a Fact Sheet issued for Section 179

New Rules and limitations for depreciation and expensing under the tax cuts and job act

Guide to Saving Money by Using Section 179 Tax Deduction

Now that we understand the basics of Section 179, it's important for ISP contractors to know where they can purchase reliable step vans. There are a few questions that an ISP contractor should ask the dealer when inquiring about a potential van, including:

  • What is your warranty?
  • What is your delivery time on new step vans? Used?
  • Do you have an in-house mechanic?
  • Where do I take my step van to perform the warranty work?
  • Who is my contact should I have questions after the sale?
  • Can the dealer make modifications to the truck to meet ISP standards?
  • Will the dealer apply the required graphics?
  • Does the dealer have an in-house paint department?

MAG Trucks can help you with the above questions and provide the largest selection of new and used step vans ready for ISP contractors. As a trusted name for thousands of Independent contractors across the United States, MAG Trucks has new and used vehicles on their lot, spanning a range of years, mileage, and programs to meet the customer demands. MAG also incorporates finance options if the customer is interested, which still allows ISP contractors to take advantage of tax deductions and savings available in Section 179. The sales team at MAG can help you understand the tax savings and help answer your questions.

 

Are you ready to get started? Check out MAG's inventory and give us a call if you'd like to discuss purchasing options! 800-888-4614


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