The Tax Break That Small Businesses Need to Know About (Infographic)

You can get a tax deduction for equipment you buy for your startup

learn more about Nina Zipkin

By Nina Zipkin

Shutterstock

Article originally published Jan. 30, 2016. Updated Oct. 14, 2016.

Did you know that you can get a tax deduction on equipment you purchase for your business? It's a part of the tax code called Section 179. It's been around for a while, but a $1.8 trillion spending bill passed by Congress at the end of 2015 permanently capped the tax break at $500,000.

Companies that spend $2 million in equipment -- anything from machinery, computers, chairs and desks, printers, testing apparatuses, business vehicles and even tractors -- can qualify for the Section 179 deduction.

Related: The Top 4 Tax Strategies To Save Your Business Money

The limit for Section 179 has been incrementally and temporarily raised over the past several years from its initial $25,000-a-year cap to $100,000 in 2003, and then $250,000 in 2008 in an effort to drive spending during the recession. It has been sitting at $500,000 since 2010, but it hadn't been permanently expanded until recently.

Tom Wheelwright, a CPA and the founder and CEO of ProVision Wealth Strategists, says that it is unlikely that the cap will change in the near future. He adds, however, that entrepreneurs should be careful with how they use it.

"The most creative use of it is when an entrepreneur moves into a new office or updates their old office," Wheelwright says. "Leasehold improvements qualify for Section 179 under the current law. Be sure not to buy equipment just for the deduction. That's always a mistake. The government is only sharing about 40 percent of the cost. The rest of the cost is yours."

Related Book: What Your CPA Isn't Telling You: Life-Changing Tax Strategies by Mark J. Kohler | Amazon | eBooks.com | Barnes & Noble

For more on what small-business owners need to know about how the tax break applies to them, check out the infographic compiled by Balboa Capital below.

Click to Enlarge+
Section 179 tax  (Infographic)

Related: The 2 Glaring Mistakes Entrepreneurs Make When It Comes to Taxes

Nina Zipkin

Entrepreneur Staff

Staff Writer. Covers leadership, media, technology and culture.

Nina Zipkin is a staff writer at Entrepreneur.com. She frequently covers leadership, media, tech, startups, culture and workplace trends.

Related Topics

Editor's Pick

Everyone Wants to Get Close to Their Favorite Artist. Here's the Technology Making It a Reality — But Better.
The Highest-Paid, Highest-Profile People in Every Field Know This Communication Strategy
After Early Rejection From Publishers, This Author Self-Published Her Book and Sold More Than 500,000 Copies. Here's How She Did It.
Having Trouble Speaking Up in Meetings? Try This Strategy.
He Names Brands for Amazon, Meta and Forever 21, and Says This Is the Big Blank Space in the Naming Game
Business News

These Are the Most and Least Affordable Places to Retire in The U.S.

The Northeast and West Coast are the least affordable, while areas in the Mountain State region tend to be ideal for retirees on a budget.

Business News

I Live on a Cruise Ship for Half of the Year. Look Inside My 336-Square-Foot Cabin with Wraparound Balcony.

I live on a cruise ship with my husband, who works on it, for six months out of the year. Life at "home" can be tight. Here's what it's really like living on a cruise ship.

Business News

American Airlines Sued After Teen Dies of Heart Attack Onboard Flight to Miami

Kevin Greenridge was traveling from Honduras to Miami on June 4, 2022, on AA Flight 614 when he went into cardiac arrest and became unconscious mid-flight.

Leadership

Are You Being Too Soft as a Leader? You Might Need to Try a Different Approach

At the core of leadership, we must provide purpose, direction and motivation to our employees — but not everyone is using the right leadership style to offer these things. Here's why you might need to consider a more rigid approach.

Starting a Business

Free Event | March 30: Solopreneur Office Hours with Terry Rice

Running a one person business is challenging, but we're here to help you. Tune in as our expert, Terry Rice, answers your most pressing questions.