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What Is the Section 179 Tax Deduction?
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How the Section 179 Tax Deduction Can Help You
FAQ: Section 179 Tax Deduction
We want to make your loan process as easy as possible and save you money,
so here are some of the top questions we get about financing equipment under
Section 179 with answers from our experts.
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.
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.
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 cars is capped at $11,160. The cap for trucks and vans, such as a pickup truck under 6,000 lbs GVWR, is $11,560. 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.
In order to use the Section 179 deduction for 2019, you will need to have the purchased or leased the qualifying equipment this year for your business. This means you have until December 31, 2019 to purchase or lease the equipment if you seek to deduct it from 2019 taxes.
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.
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.
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.
Although Bonus Depreciation used to only cover new equipment, the law has changed to allow for used equipment to qualify in 2019. The limit for Bonus Depreciation changes from year to year, but for 2019 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.
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.
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.
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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(1) 24 hours:
Fast approvals and 24 hour funding subject to receipt of required documentation, underwriting guidelines, and processing time by your bank. Funds are deposited into your business checking account as soon as the next business day after approval and acceptance of terms.
(2) Early payoff discounts:
National Funding offers special opportunities for its customers to terminate contracts early and receive a discount in the process. Equipment Finance customers who pay off the total remaining balance early, at any point during the contract, will automatically receive a 6% discount off the total remaining balance. Working Capital customers who pay off the total remaining balance in full within the first 100 days of the contract will automatically receive a 7% discount off the total remaining balance. We do not currently offer a discount on our lease contracts. Customers must pay off the balance in full, be current, and in good standing to take advantage of the discount within the time parameters.
(3) Automatic payments:
Loan payments are withdrawn via Automatic Clearing House (ACH) Monday through Friday excluding bank holidays.
(4) Wide variety of payment options:
- Equipment Financing: payments are remitted monthly with terms of 2-5 years
- Working Capital Loan: payments can be remitted daily or weekly with terms of 4 months up to 24 months
(5) Potential Tax Savings:
The Section 179 Tax Deduction allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. Meaning, if you buy (or lease) a piece of qualifying equipment, you can deduct 100% of the purchase price from your gross income. You can secure the equipment, tools, and technology you need, while also taking advantage of significant tax deductions - up to $1,000,000. Consult your tax professional for more details.
(6) Guaranteed lowest payment:
Pursuant to the terms and conditions specified in these Rules and Restrictions of the Guaranteed Lowest Payment, National Funding guarantees to provide the lowest payment on equipment leased through National Funding, for lease terms from 24 to 60 months, or to pay $1000 towards qualifying executed leases. Lease payment comparisons must be based on a lease in excess of $10,000, for approved equipment, and with the same terms and conditions as those offered by National Funding within seven days that the National Funding terms are issued. To be eligible, customers must provide a competitive lease quote without contingencies, and vendor invoice, and in the name of the lessee within seven calendar days of the date National Funding issues its terms. Guarantee only valid on competitive equipment leases. Equipment finance agreements do not qualify.
In the event that the monthly lease payment amount from the competing lease company or bank is lower than the monthly payment that is being offered by National Funding for the same equipment and pursuant to the same terms, National Funding will verify the validity and accuracy of the competing leasing company’s or bank’s payment options, terms and the vendor quote. National Funding has the option, in its sole discretion, to either beat the competing leasing company’s or bank’s monthly payment rate, or pay $1000 to the lessee. The lessee must provide National Funding with the competing company’s or bank’s signed lease agreement with payment terms/options, and take delivery of the equipment. Payments will be made within 30 days, and lessee is responsible for any taxes.
The Guaranteed Lowest Payment is available to both new and established customers of National Funding. This offer is valid for new lease applications only. The Guaranteed Lowest Payment is not retroactive — a previously funded equipment lease with National Funding is not eligible for the Guaranteed Lowest Payment. Only non-contingent offers of lease terms and payment are eligible. Offers made to lessee that include subsidization by manufacturers and/or vendors will not be considered in comparing competing offers.
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To participate in the Guaranteed Lowest Payment program, if you have a lease agreement and vendor quote which you believe will qualify for the program, contact your National Funding Lease Manager.
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This is not a guaranteed offer of credit. Loans subject to lender approval. Approval amount is based on eligibility determined by information obtained from Dun & Bradstreet. Actual eligibility may vary. Restrictions may apply. Application is subject to approval by the lender and is based on factors such as business type, time in business, annual sales, average bank balances, personal credit and other variables deemed relevant by the lender.