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Section 179 Yearly Tax Deduction

What is Section 179 Tax Deduction?

Section 179 is a tax deduction that enables businesses to depreciate assets in the first year they purchased the asset. All assets must be put to use by December 31 of the 2025.

Why should I care about this tax deduction?

In 2025, your business can deduct the full cost of qualified equipment purchases, up to $1,250,000, with a “total equipment purchase” limit of $3,130,000.

Besides, you can take advantage of 40% Bonus Depreciation on the “new to you” equipment this year.

How to calculate my savings from Section 179?

Please use our equipment calculator for illustrative purposes:

What qualifies as Tax Deductible assets under Section 179?

  • Tangible property or hard assets (such as machines, equipment, furniture)
  • Single-purpose agricultural or horticultural structures
  • Storage facilities
  • Off-the-shelf computer software placed in service during the tax year

What are the requirements?

  • New or Used equipment with a total price of up to $3,130,000
  • Must be acquired for business use
  • Must be put to use before December 31st, 2025

How can I benefit from this Tax Deduction?

AFG offers financing and leasing solutions that are compatible with Section 179. Benefit from tax savings this year and pay for your equipment over time.

Get a free quote on equipment financing today.

*The information on this site is for illustrative purposes only. Please consult with a qualified tax advisor concerning your specific situation.

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5 Ways for Business Owners to Reduce Their Taxable Income

The Internal Revenue Code allows for a wide variety of options to save money on taxes, encouraging entrepreneurs to create jobs and invest in thier businesses.

We do not recommend spending money for the sole purpose of reducing your taxes. However, you are likely to benefit from smart spending. Here are some popular solutions to lower your tax liabilities and save money for your business.

Tax Credits

The federal government offers tax credits and tax breaks that drive business owners to make decisions that improve the overall American economy. Actions such as hiring employees, creating an accessible environment for people with disabilities, shifting to emissions-free technologies, and even offering health coverage for employees can qualify you to save money on taxes.

Qualified Business Income (QBI) Deduction

You may qualify to deduct 20% from the QBI if your business is an S-Corp, a partnership, or a sole proprietorship. This deduction comes additionally to your regular deduction of business expenses. You could qualify if your taxable income is under $157,500. The amount goes up to $315,000 if you are filing a joint return with your spouse.

Write Off Bad Debt

Unfortunately, some customers may never pay for what they purchased on a note. The last quarter is the perfect time to identify those receivables and write them off to save money on taxes this year.

Fund a Retirement Plan (For Yourself and Employees)

Adding money to an Investment Retirement Account such as 401(k) and 403(b) free you from taxation up to a certain amount every year. The share of income put in an IRA is usually tax-free until you withdraw it. Consider consulting a tax advisor to make sure you qualify.

Section 179 and Bonus Depreciation

Business assets such as machinery, vehicles, and other equipment can qualify for a Section 179 deduction. This part of the IRS Code allows your business to write off up to $1,250,000 of the equipment cost in the first year. You can take advantage of this rule until you reach $3,130,000 for the year.

The additional bonus depreciation also offers a tax break of 40% on equipment cost. The current bonus depreciation rules are valid until January 1, 2026.

Please, note that you must put the newly acquired equipment in use by December 31 to take advantage of these tax benefits.

Note

Other restrictions may apply to the tax breaks explained in this article. Check if you are eligible with your tax advisor.

We Can Help

Alliance Funding Group offers equipment leasing solutions that qualify for Section 179 deduction.

Get a custom-tailored quote this year and save money on taxes.

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4 Ways to Avoid Equipment Obsolescence

According to the law of accelerating returns, the speed at which technologies improve doubles every ten years. The equipment we consider cutting-edge today is likely to become uncompetitive or even obsolete in just a few years. That is unsettling news for businesses that rely on high-tech solutions.

How to avoid equipment obsolescence?

Companies rely on stable cash flow and planned capital expenditures to stay on budget. We have identified four ways that can help you keep up.

1. Monitor the value of your equipment

Equipment can make up a large share of a company’s total assets. Companies that employ complex technological solutions have to pay special attention. It is crucial to identify the right moment to upgrade. As new generations of tech are being launched, the market value of older equipment drops.

Sometimes, an early upgrade will help avoid depreciation losses in the future, while the freed-up funds will provide for a wider range of procurement options.

2. Lease your equipment

Equipment leasing solutions offer beneficial ways to upgrade because you get a choice of options at the end of the term. For example, you can

  • Purchase the equipment at market value
  • Keep leasing with lower monthly payments
  • Return the equipment and upgrade

Leasing is faster than using a bank loan and requires little to zero money upfront. That allows swift upgrades on a budget and helping to avoid equipment obsolescence within your business.

3. Keep track of your working capital

Working capital is the net amount of current (liquid) assets that your business has. Maintaining a positive working capital balance is not just a general best practice. The available cash reserves can be used to secure a good deal on equipment on short notice, saving lots of money in perspective.

Thousands of companies in America use working capital loans or lines of credit that allow extra flexibility in thier business. For example, at AFG, we can provide up to $250,000 of unsecured funds in just 24 hours.

4. Mind the tax returns

No one enjoys the topic of taxes unless it is about deductions. According to Section 179 of the IRS Tax Code, you can deduct up to $2,590,000 of the total equipment price in 2020. You can take advantage of this regulation every year, but only up to the set limit. That is another reason why timely upgrades can preserve your company’s budget.

Running a business comes with much effort and responsibility. Choosing simple financial solutions can help you avoid equipment obsolescence and generate better returns on capital-heavy purchases.

Chat with an experienced Account Manager to learn more about quick and easy equipment financing & leasing options for your business.

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What is the difference between a lease and a loan?

Choosing the right financial product for your business needs is crucial in order to stay on budget. In this article, you will find the most important differences between a bank loan and a lease.

What is the difference between a loan and a lease?

A loan is borrowing money to purchase a piece of equipment and pay it back over time.

A lease is an agreement that allows you to use specific equipment for a period of time.

 

  Loan Lease
Amount 60-80% of the purchase price. Banks typically do not include additional costs, such as delivery, installation, software licenses, or sales tax. Up to 100% of the equipment price. Some leasing companies can also incorporate additional costs into your agreements.
Rates Banks rely on Prime Rate or other indexes when determining an individual rate for your business. Therefore, rates and payments can fluctuate during the term. Lessors determine a fixed rate upfront and offer equal payments month-to-month unless special provisions are included in the contract. That makes budgeting and cash flow management easier.
Terms Banks offer a selection of standard terms and tend to be less flexible when it comes to special requests. Equipment leasing agreements can be as short as 12 months and as long as 84 months. Sometimes, it is possible to request a balloon payment at the end to get lower monthly payments.
Equipment It is easy for banks to lend money for popular products such as cars, but much harder for the types of professional equipment they do not understand. Leasing companies specialize in working with industrial equipment. They understand your business and the equipment in use.
Collateral Most banks require additional collateral such as other owned vehicles, real estate, or accounts receivable. Only the piece of equipment being leased is required as collateral. Your other business assets are not involved.
Application Banks take 2 to 3 weeks to review your file and make a decision. Typically, a decision can be made in just 1 business day.

Considering an equipment purchase?

Connect with our Account Executive to find a solution that suits your business needs.