As 2015 draws to a close, small business owners are watching and waiting for Congress to reach an agreement about this tax year’s Section 179 deduction. For small businesses, Congress’s decision could mean the difference between a $25,000 expense deduction cap and up to a $500,000 cap.
As the clock ticks on the $1.1 trillion spending bill that would clarify this year’s Section 179 deduction, many small business owners’ budgets remain up in the air, and the delay is already impacting their operations.
What is the Section 179 deduction?
The Section 179 deduction is an asset depreciation deduction on equipment purchased for a business. Business owners have always been allowed to deduct asset depreciation, but Section 179 allows them to deduct an asset’s total depreciation up front.
For example, the expense of a $4,000 computer would normally only provide a $400-$800 per year depreciation deduction over a period of six years using the straight-line depreciation method. However, Section 179 allows a business owner to deduct the full cost of the computer from his or her income taxes up-front, assuming the total amount of deductions remains below the maximum deduction cap.
What assets qualify for the deduction?
The IRS allows…
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