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Section 179 Tax Deduction

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What Is the Section 179 Tax Deduction?

The section 179 tax deduction allows small businesses to deduct the purchase price of qualifying equipment from their gross income in the year it is purchased. This tax break increases savings for business owners in 2023 by allowing them to deduct the price of depreciating equipment all at once rather than incrementally as in other tax years.

Allows business owners to:

Purchase new or used qualifying equipment

Purchase new or used qualifying equipment

Take 100% of the deduction this year

Take 100% of the deduction this year

Improve cash flow for next year

Improve cash flow for next year

How the Section 179 Tax Deduction Can Help You

The Equipment You Need icon

The Equipment You Need

Put new equipment to work now. National Funding's Funding Specialists are here to guide you through your financing options.

The Deduction You'll Love icon

The Deduction You'll Love

With Section 179-qualifying equipment purchases, you'll be able to take advantage of a 100% deduction this year.

Section 179 Savings Calculator

See how much you can save with the Section 179 Tax Deduction.

$80,000
Select Tax Rate
Slide to Select Equipment Cost $ Amount
$10k$2.7M

Section 179 Deduction

Up to $1.08M

$80,000

Cost of Equipment

After Tax Savings

$52,000

Cash Savings

at 35% tax bracket

$28,000

This calculator is intended to provide a potential tax scenario that may not apply to your business. Bonus Depreciation Deduction included for amounts greater than 1.08 million. Consult your tax professional to determine tax implications and benefits for your business.

How the Section 179 Tax Deduction Works

1

Purchase

big-ticket items such as vehicles, office equipment, software & machinery before December 31st.

2

Deduct

up to $1.08 million in equipment costs (with a $2.7 million spending cap).

3

Save

on your taxes in the same year. See how below.

Expand Your Options with National Funding

Taking advantage of the 179 tax deduction may be the right way to help your small business grow. At National Funding, we can help you achieve the flexibility you’ll need to make your tax deductible purchases in 2023 with small business loans. With our funding solutions, you can boost opportunities for your business.

How to Apply for Financing Options with National Funding

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FAQ: Section 179 Tax Deduction

We want to make your loan process as easy as possible and save you money. That's why we're answering some of the top questions we get about financing equipment under Section 179 with solutions from our experts.

What is Section 179?
The Section 179 tax deduction gets its name from Section 179 of the IRS Tax Code. This section of the Tax Code states that businesses may deduct up to the full purchase price of qualified business equipment from their taxes within the same tax year. Equipment can range from heavy machinery like backhoes to computers and certain software programs for your business.
What kind of equipment qualifies under Section 179?
One of the great things about the Section 179 deduction is there are more options than you might realize for the type of equipment you can claim. Additionally, the equipment can be either new or pre-owned, giving you a broader range of choices. Things like heavy machinery, office equipment, computers and office furniture are usually able to be deducted. Vehicles may also be deducted, with some limitations and deduction caps. See the IRS guidelines for a comprehensive list of qualifying equipment.
Does a used vehicle qualify for Section 179?
You can apply Section 179 deduction for vehicles, with some restrictions. Passenger vehicles that could also be used for personal use have limited deductions. The deduction for sport utility vehicles in the 2022 tax year is capped at $27,000. Additionally, the vehicle has to be registered in the name of the business. Use the IRS guidelines on qualified property to learn more about vehicle restrictions.
What is the deadline for using Section 179 in 2023?
In order to use the Section 179 deduction for 2023, you will need to have the purchased or leased the qualifying equipment this year for your business. This means you have until December 31, 2023 to purchase or lease the equipment if you seek to deduct it from 2023 taxes.
How can I calculate Section 179 deduction?
It’s a good idea to calculate potential tax savings in advance. Using a Section 179 deduction calculator like the one on this page, can help you get a better idea of your potential savings. Regardless, you’ll want to discuss with a tax professional to determine if taking the Section 179 deduction is the right choice for your tax situation.
Should I take the Section 179 deduction?
The Section 179 deduction is an opportunity to take in the year you place your equipment in service. If your business is going to be purchasing or leasing expensive or a bigger-ticket piece of equipment, it may make sense to use the deduction. This is because you can deduct the full amount of your equipment without paying the full price up front.
How to claim Section 179 deduction?
After determining if a Section 179 deduction is right for you, you can work with your tax advisor to determine your deduction amount. The actual process of claiming the deduction is simple. Using IRS form 4562, you’ll simply select the dollar amount of equipment under Section 179. You’ll include the form in your tax return when you file.
What is the difference between Section 179 and Bonus Depreciation?
Although Bonus Depreciation used to only cover new equipment, the law has changed to allow for used equipment to qualify. The limit for Bonus Depreciation changes from year to year, but for qualified property acquired and placed in service between Sept. 27, 2017 and Jan. 1, 2023 it is 100%. Bonus Depreciation is used in addition to the Section 179 deduction for businesses that purchase or lease equipment valued over the Section 179 cap. Generally, the Section 179 deduction is taken first and then the Bonus Depreciation is applied.

Section 179 Resources

Taxes and deductions can be confusing, so we want to make information about the Section 179 Tax Deduction as simple as possible. Here are some resources to help you better understand how the Section 179 Tax Deduction benefits your equipment financing.
When It Makes Sense to Use the Section 179 Tax Deduction, and When It Doesn’t

When It Makes Sense to Use the Section 179 Tax Deduction, and When It Doesn’t

If you’re on the fence about whether your business can afford a new piece of equipment, the IRS just might be your savior (did you ever imagine yourself thinking that?). Under the Section 179 tax deduction, business owners get a large, upfront tax break when they buy new assets. What qualifies for Section 179 depreciation and is it the right move for your small business? Here’s what you need to know.

What Is a Section 179 Tax Deduction?

The Tax Cuts and Jobs Act changed things for business owners large and small, resulting in new tax cuts and modifying some standard deductions that business owners have been used to claiming for years — like the Section 179 tax deduction. The good news is that you can still use this deduction, but it’s important to read the fine print to make sure you’re using it right. Let’s break it down.

What Is a Section 179 Tax Deduction?
IRS Form 4562 Instructions: How to Nab Your Section 179 Deduction

IRS Form 4562 Instructions: How to Nab Your Section 179 Deduction

The Section 179 deduction can be one of the juiciest tax breaks for small businesses. When it's time to file taxes, you'll need to follow IRS Form 4562 instructions to claim your deduction. The form is broken up into six parts and can be technical, but don't let this scare you away from claiming your deserved tax break. We're here to walk you through the most important sections.

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