Jukebox Quilts in Fort Collins is here to help you understand the Section 179 deduction if you are a small business. Read through our post to learn more about tax savings you might be eligible for. If you need to purchase sewing machines, quilting fabrics, patterns, and more, make sure you stop by Jukebox Quilts in Fort Collins!
The Section 179 Deduction
If you are interested in starting a business to provide quilting or sewing services or if you already own a business and you need to purchase new or used sewing machines or equipment, then Section 179 might help to reduce your tax liability. The tax savings will depend on the type of business you have set up, (C Corporation, LLC, or sole proprietor) your gross income, and your taxable income. The tax rates for 2019 are as follows:
So if you estimate that you will have taxable income that falls into any of the 2019 tax brackets, you can reduce your tax liability by taking advantage of the Section 179 deduction. For example, If you purchase an Innova M24 with Autopilot Mach 3 sewing machine for $36,000, you operate your business as an LLC (income passes through to your personal return), and your combined personal and business taxable income falls into the 22% tax bracket for 2019 ($79,000 – $168,000), you could reduce the taxes you owe by $7,920 by taking the deduction for the full value of the sewing machine in the current calendar year.
That is like getting a $7920 discount on your machine, thanks to our federal government!
What is the Section 179 Deduction?
Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves.
How Does Section 179 Work?
In years past, when your business bought qualifying equipment, it typically wrote it off a little at a time through depreciation. In other words, if your company spends $50,000 on a machine, you could write off (for example) $10,000 a year for five years (these numbers are only meant to give you an example). Now, while it’s true that this is better then no write-off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it. And that’s exactly what Section 179 does — it allows your business to write off the entire purchase price of qualifying equipment for the current tax year.
This has made a big difference for many companies (and the economy in general). Now, businesses can use Section 179 to purchase needed equipment right now instead of waiting. For most small businesses, the entire cost of qualifying equipment can be written-off on the 2019 tax return (up to $1,000,000).
Who Qualifies for Section 179?
All businesses that purchase, finance, and/or lease new or used business equipment during tax year 2019 should qualify for the Section 179 Deduction (assuming they spend less than $3,500,000).
Most tangible goods used by American businesses, including “off-the-shelf” software and business-use vehicles (restrictions apply), qualify for the Section 179 Deduction.
For basic guidelines on what property is covered under the Section 179 tax code, please refer to this list of qualifying equipment. Also, to qualify for the Section 179 Deduction, the equipment and/or software purchased or financed must be placed into service between January 1, 2019 and December 31, 2019.
Can I Use the Equipment for Personal Use?
The equipment, vehicle(s), and/or software must be used for business purposes more than 50% of the time to qualify for the Section 179 Deduction. Simply multiply the cost of the equipment, vehicle(s), and/or software by the percentage of business-use to arrive at the monetary amount eligible for Section 179.
What Equipment Qualifies for Section 179?
Section 179 was designed with businesses in mind. That’s why almost all types of “business equipment” that your company buys or finances will qualify for the Section 179 deduction.
All businesses need equipment on an ongoing basis, be it machinery, computers, software, office furniture, vehicles, or other tangible goods. It’s very likely that your business will purchase many of these goods during the year, and will do so again and again. Section 179 is designed to make purchasing/leasing that equipment during this calendar year financially attractive.
Please keep in mind that to qualify for the Section 179 Deduction, the equipment listed below must be purchased and put into use between January 1 and December 31 of the tax year you are claiming:
- Equipment (sewing 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 (see Section 179 Vehicle Deductions)
- Computers
- Computer “off-the-shelf” software
- Office furniture
- Office 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
Please note – the above equipment qualifies whether new or used (but must be new to you), and also regardless of whether it was purchased outright, leased, or financed.
Shop Jukebox Quilts in Fort Collins
We hope that this information about the Section 179 deduction can help you and your business. If you’re looking for sewing machines or other business fabric and materials, make sure you stop by Jukebox Quilts in Fort Collins to see our selection today!
