Section 179 is a piece of good news for all business owners and employees utilizing computers in their business or work. This includes software purchased for business purposes. So how does Section 179 really work? Here is a brief overview of how you can apply your computer purchase for your tax deduction.
What is Included
Section 179 covers computers, software and refurbished computers (yes, refurbished too!) that are used for business purposes. If you are a business owner, you can deduct the full amount from your tax if you use the computers for sole business purposes. Personal use can be deducted proportionally and excluded from the tax cut portion. Example, if you use your computer 30% of the time for personal use then instead of deducting the whole cost of your computer from your tax, you can deduct only 70%.
You can also check out a complete list of the qualified goods under Section 179 HERE.
What is Required
The requirement for equipment to qualify as a business expense is that it should be used more than 50% of the time for business use. Quantify the cost multiplied by the percentage it is used for business to arrive at the tax deduction applicable.
The limitation set by Section 179 is at $2,500,000. Your total business equipment should not exceed the cap. If it does exceed, however, Section 179 provides deduction only up to that point. Also, you can’t use Section 179 if your total expense exceeds your income for that year. This is true for start-ups. If it does happen, don’t worry – you can save up the receipts and use it for future years when business profits start to turn in. Another way of utilizing Section 179 in case income is not so good is if you are filing joint tax with your spouse, then you can use your tax deduction under Section 179 when applicable.
How Does it Differentiate with Bonus Depreciation?
One huge difference is that bonus depreciation is offered on and off. For 2018 however, bonus depreciation is offered 100%! So pay attention and maximize this opportunity to the fullest. Bonus depreciation is applied “after” Section 179. This is great news for large business owners whose expenses for equipment exceeds the cap set under Section 179.
Employees Can Use Section 179 too!
If you are an employee and is using your own computer for your work more than 50% of the time then you can ask your boss to pay the proportionate amount and declare that as a business expense! The downside for 2018 is that unreimbursed employee expenses can no longer be deducted.
Unqualified? No Problem
In case your computer does not qualify for Section 179 because you use it less than 50% of the time for business or for work then you still have Depreciation to look forward to.
Need help with finding the right computer? Or just wanting to check our newest collection? Contact us at 480-550-9078 or send us an email: email@example.com. Check out our website: www.TheMightyPC.com