If you own a small or medium sized business, the IRS wants you to invest in your company by providing you with the opportunity to deduct the full purchase price of equipment or software you have purchased, up to $500,000.00.

In the past, you may have heard your tax-preparer friends refer to the Section 179 Deduction as the “Hummer Deduction” or the “SUV Tax Loophole,” because it brought business owners, who purchased such vehicles, much joy with the deduction allowances it provided. But the function of the Section 179 has shifted away from that specific benefit in the past few years and geared more toward equipment, vehicles, and software that are useful for everyday operations of all types businesses.

Because this deduction is specifically meant for smaller businesses, if the total amount of the equipment purchased by the business is over the limit of $2,000,000.00, the deduction will begin to phase out dollar-for-dollar for any amount over the limit. In order to qualify for this deduction, the equipment or software must be purchased and placed into service between January 1, 2016 and December 31, 2016. The equipment or software can be either new or used and can also be financed or leased. Click here to see a list of qualifying property.

Along with the increased limit of deduction this year, the 50% Bonus Depreciation will also be extended through 2019. This depreciation can be used by businesses of any size. Any equipment purchased and put into service between the years of 2015 and 2017 can be depreciated by 50% in the first year. This depreciation allowance will be reduced to 40% in 2018 and 30% in 2019. So if you are a large business who has, for example, spent $3 million in equipment purchases, you are not completely left out! You can still deduct $1.5 million in your tax return.

The purpose of these extended deductions is to help businesses, and especially startup businesses, to invest in themselves and get the tax break that they need to do so now. Take advantage of this opportunity and better your business by speaking with you accountant about strategic planning. Read more detailed information about the Section 179 Deduction and the 50% Bonus Deduction here.