The biggest advantage of the Section 179 deduction is the significant tax relief that it provides in the short term. If you take out a Section 179 deduction on depreciable equipment, you will get a larger deduction on your purchases in one year. This will provide you with larger tax savings in the short term, allowing you to offset the cost of several equipment purchases at once.
For example, your company buys $200,000 worth of professional construction equipment in 2022. You can write off or deduct the entire $200,000 if your equipment meets the Section 179 requirements. Assuming a tax bracket of 35%, you’d save $70,000 on the equipment purchase ($200,000 x .35), making the total cost of the equipment $130,000.
One potential downside to taking a Section 179 deduction is that it may push your company into a lower tax bracket
. If you take out a larger initial deduction on your purchases, the deduction may offset later income that might have been taxed at a lower rate.
Work with your business tax advisor to determine if you can benefit from a Section 179 deduction.