What can you deduct under §179?
Purchasing equipment is simply part of running a business. Electing to immediately deduct the entire business purchase instead of capitalizing it and depreciating the asset over its useful life, which is usually several years, could provide substantial tax relief for business owners, especially those who are purchasing start-up equipment.
To qualify for the deduction, property must have been acquired for business use and by purchase. Tangible property that qualifies for the deduction includes:
• Machinery and equipment.
• Property contained in or attached to a building (other than structural components), such as refrigerators, grocery store counters, office equipment, printing presses, testing equipment and signs.
• Gasoline storage tanks and pumps at retail service stations.
• Livestock, including horses, cattle, hogs, sheep, goats and mink.
Generally, off-the-shelf computer software also qualifies for this deduction, as does qualified real property, including leasehold improvement property, restaurant property or retail improvement property.
Generally, you cannot claim this type of deduction if the expense is being used for:
• Land and improvements.
• Leased property.
• Property used for lodging.
• Energy property.
The total amount you can deduct under §179 for most property placed in service in tax years beginning in 2016 generally cannot be more than $500,000.