How to Minimize Capital Cost on Your Digital Press: Section 179
If you’re a small to medium-sized business, chances are you can reduce your capital costs for a digital press during the current tax year. Section 179 of the United States Internal Revenue Service Code (26 U.S. Code § 179) allows businesses to deduct equipment costs from their gross income.
Using Section 179 can be a great way for a small or medium business looking to invest in a digital press to reduce the capital expenditure required for that investment, even if they finance the purchase. Let’s take a closer look at how Section 179 may benefit your business in tax savings.
What is Section 179?
Section 179 is a section of the US tax code that allows businesses to deduct the cost of many types of equipment and supplies from their gross income for the year. If you are a business owner, a tax deduction can make a huge difference.
Here are a few of the most important facts about Section 179 which may impact you as a business owner:
- Section 179 can be used to deduct the full purchase price of any qualifying equipment purchase up to the maximum allowed amount.
- The Section 179 deduction limit is $1,040,000.
- The total amount of equipment purchased by the business cannot exceed $2,590,000 for the year.
- Deductions for equipment must occur in the same year they are purchased.
- To qualify for the deduction the equipment or asset must be used for business use more than 50% of the time. That percentage impacts the dollar amount that may be eligible for deduction.
What Equipment Qualifies for Section 179
The Section 179 deduction has very loose guidelines for qualifying equipment that enables it to be taken for nearly any office equipment or supplies, including a new or refurbished Xerox printer.
The guidelines for Section 179 minimize capital cost indicates that qualifying equipment includes most tangible equipment that is considered a business asset, including machinery, office equipment, computers and most commonly available computer software, improvements to business properties, office furniture, and some vehicles. Additionally, upkeep such as printer maintenance for this equipment can be written off to receive a tax benefit as well.
If you’re wondering whether you can use section 179 minimize capital cost for investing into a digital production press, the answer is yes! Xerox digital presses do qualify for Section 179 deduction, and if you haven’t already exceeded the deduction limit you may be eligible to deduct the entire purchase price provided the purchase is made in 2020.
Can you use the Section 179 Deduction for Refurbished Equipment?
Yes! The Section 179 tax deduction can be used for both new and used equipment, which includes refurbished equipment such as refurbished copiers. This makes the Section 179 deduction a great way to offset the capital costs of a refurbished Xerox digital press.
Additionally, the Section 179 deduction can be used whether you buy, lease, or finance the equipment in question. Depending on the equipment in question, financing or leasing equipment can sometimes offer benefits over simply buying equipment outright. If the equipment being deducted under Section 179 is leased or financed, you can deduct the entire purchase price of the equipment in the first year. This means that, with the Section 179 deduction, you can not only minimize your out-of-pocket cash expenses but in some cases receive more money back from the deduction than you’ve paid out of pocket.
How to Claim the Section 179 Deduction
Claiming the Section 179 deduction is fairly simple, but you will need to fill out some extra paperwork at tax time. To claim the Section 179 deduction you’ll need to fill out Part I of IRS form 4562. To maximize the benefit you receive from Section 179 and to ensure that all of your expenses are qualifying, it’s highly recommended to work with a professional tax preparer that is familiar with the Section 179 tax deduction.
What’s the Downside of the Section 179 Deduction?
None! If you’re a small or medium-sized business that is looking to invest in products such as capital equipment that will improve your operations, the Section 179 deduction can be a powerful tool.
Here’s a very simple example of how Section 179 can help reduce your capital costs for equipment. Let’s say that in 2020 you buy a $100,000 refurbished piece of equipment and haven’t made any other deductions under Section 179 for the year. You’ll be able to deduct the full $100,000 on your taxes. With an assumed tax bracket of 25%, your total equipment costs after you include the tax savings will be only $75,000.
If you’re a small or medium-sized business in the United States, the Section 179 deduction can be used to reduce your capital costs for equipment purchases you’ve made throughout the year. Currently, the maximum deduction limit under Section 179 is $1,040,000. In order to be eligible for a Section 179 deduction the equipment must be used 50% or more for business use, and that percentage directly impacts the amount you can deduct. Additionally, deductions must occur in the year the equipment is purchased, and the total equipment investment by the company can’t exceed $2,590,000.
The great news is that the Section 179 deduction can be used to purchase new, used, and refurbished equipment. Section 179 can also be used for leased for financed equipment, making it a great way for businesses to expand their services while minimizing capital output.
If you’ve been in the market for a new digital press but are wary of the expense, there’s no better time than now. Remember, the equipment can only be written off in the year it was purchased, so be sure to act now if you’d like to claim the deduction in the current tax year. To learn more about how you can use Section 179 to purchase a new or refurbished Xerox digital press, contact X-Digital today!
“Section 179 at a Glance for 2020”
“Property that Qualifies for Section 179”
“Section 179 FAQs”