The Tax Break That Small Businesses Need to Know About (Infographic) You can get a tax deduction for equipment you buy for your startup

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.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Side Hustle

'I Was Called Crazy': This 27-Year-Old's Side Hustle Hit $30,000 a Month in Under a Year — Now It's Worth Millions

Changing regulations forced Angel Rodriguez's jet ski rental company to shut down, and the young entrepreneur had to figure out his next move — fast.

Side Hustle

This 30-Year-Old's $6,000-a-Month Side Hustle Started Making Money 'Immediately' — But He's Not Quitting His Day Job

Derrick Mathy works in orthopedic surgical device sales and is on a mission to bring people together in real life.

Business News

'Unprecedented in Our 53-Year History': Southwest Airlines Announces Its First Mass Layoffs Ever

The airline is eliminating 15% of its corporate workforce, including many in senior leadership positions.

Business News

Elon Musk's xAI Claims Its New Grok 3 AI Is Better Than ChatGPT and DeepSeek: 'Seeing the Beginnings of Creativity'

xAI debuted the new AI on Monday, claiming it has 10 times the computational power of Grok 2.

Business Ideas

70 Small Business Ideas to Start in 2025

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2025.

Business News

Your Old Apple AirPods Can Soon Act as an Over-the-Counter Hearing Aid, According to the FDA

The new software is compatible with the Apple AirPods Pro and accessible through iOS — for free and now FDA-authorized.