If you are planning to purchase or lease equipment in the next few months, or early in 2014, perhaps you should consider doing it prior to December 31 to be able to get the benefit of section 179 of the IRS tax code.
Section 179 allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. In other words, if a business buys or leases qualifying equipment, they can deduct the full purchase price from their gross income for that year. It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves. It has been in existence since 2008, but may be short lived.
Section 179 is one of the few incentives included in any of the recent Stimulus Bills that actually helps small businesses and gives them the much needed tax relief. The idea is to get the economy moving ahead by motivating business to add equipment now instead of waiting another year or two.
For a business adding equipment, software, and/or vehicles totaling less than $500,000 in 2013, the entire cost can be written-off on the 2013 tax return. Other restrictions apply when equipment purchases exceed $2,000,000.
Next year is up in the air as to what changes we can expect in 2014 relative to tax incentives (or lack thereof), and accounting changes, that we will need to plan for and adjust to. Congress may extend these benefits in 2014, and we think it is likely to do so, but for now these benefits expire on December 31, 2013.