2.3.4.3. Section 179 Deductions
The IRS allows businesses to deduct the purchase price of certain capital equipment that is purchased and placed in service at any time during the tax year. Known as a Section 179 deduction, it is a way of expensing what otherwise would be a depreciable asset. Instead of depreciating the cost of the eligible capital asset over its useful life, its entire cost is deducted in the year the asset is placed in service, as if its cost were an operating expense. Qualifying equipment may be new or used and includes:
• machinery
• business vehicles
• business property not attached to a building (furniture, computers)
• improvements to commercial buildings
Ineligible property includes most real estate and inventory bought for resale.
Designed mainly to benefit small business, these Section 179 deductions were limited in 2018 to $1 million on any single piece of equipment and $2.5 million in total. After 2018, these annual limits are indexed to inflation. Section 179 deductions are also limited to the amount of the busin