Sandra Wärenhed | 2023-10-19
Running a facility often requires significant investment in machinery and equipment. Over time, these assets depreciate, resulting in a decrease in their value. However, there’s a tax code provision that can help you manage these costs more effectively—Section 179.
This IRS rule allows businesses to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. Here’s how it works and how it can benefit your facility.
Understanding Section 179
Section 179 is part of the IRS tax code designed to encourage businesses to invest in themselves by purchasing equipment and software. Instead of gradually deducting the cost of equipment over several years through depreciation, Section 179 allows businesses to deduct the full purchase price in the year the equipment was put into service. This can significantly lower the net cost of purchasing new equipment, making it a valuable tool for facility managers.
How Can Facility Managers Benefit?
As a facility manager, you’re constantly juggling budgets and trying to maximize every dollar. When it comes to investing in new equipment, Section 179 can be your secret weapon.
Let’s say you need to replace an aging compacting system in your facility, which costs $50,000. With Section 179, you could deduct the full cost of that system in the year of purchase, rather than spreading out the deductions over multiple years. Depending on your tax bracket, this could potentially save your facility tens of thousands of dollars.
What Qualifies for Section 179?
Most tangible goods used in a business qualify for the Section 179 deduction. This includes “off-the-shelf” software, business-use vehicles, and machinery and equipment purchased for business use.
However, there are limits to consider. For 2023, the total amount that can be written off is $1,050,000 for equipment purchases up to $2,620,0003. Above this amount, the Section 179 deduction begins to phase out on a dollar-for-dollar basis and is eliminated entirely once $3,670,000 worth of equipment is purchased.
For facility managers, understanding and leveraging Section 179 can lead to significant cost savings when investing in new equipment. It’s a powerful tool that can help you make strategic decisions that will enhance your operations while managing your budget effectively.