IRS Section 179

Section 179 has been enhanced for 2012 (retroactive) and 2013 thanks to H.R.8: American Taxpayer Relief Act of 2012 "Fiscal cliff / Fiscal Crisis" bill

2013 Deduction Limit = $500,000

2013 Limit on Capital Purchases = $2,000,000

2013 Bonus Depreciation = 50%

The above limits are as of 1/1/2013, and are for tax year 2013. In addition, 2012's old limit ($125,000 deduction) has now been raised to $500,000 as well. This means qualifying purchases you made in 2012 can now take advantage of the new, higher deduction limits.

Please Note:

Section 179 Deduction is available for most new and used capital equipment, and also includes certain software.

Bonus Depreciation can be taken on new equipment only (no used equipment, no software)

When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation – unless the business has no taxable profit in the given tax year.

Also, many businesses are finding Section 179 Qualified Financing to be an attractive option in 2013.

Tax Savings Calculator

Equipment Cost:

Sec 179 Deduction:

50% Bonus Depreciation:

Normal First Year Depreciation:

Total First Year Deduction:

Cash Savings:
(Assuming 35% tax rate)

Lowered Cost of Equipment
After Tax Savings:

Qualified Property

Non Qualifying

  • Real Property
    Real Property does not qualify for the Section 179 Deduction. Real Property is typically defined as land, buildings, permanent structures and the components of the permanent structures (including improvements). Other examples of property that would not qualify for the Section 179 Deduction include paved parking areas and fences.
  • HVAC
    Air conditioning and heating equipment is generally not eligible for the Section 179 Deduction.
  • Used Outside the US
    Property used outside the United States generally does not qualify for the Section 179 Deduction.
  • Acquired by Gift
    Property acquired by gift or inheritance, as well as property purchased from related parties does not qualify for the Section 179 Deduction (No, you can't sell equipment to yourself and qualify for Section 179).
  • Personal Property
    Any property that is not considered to be personal property, may not qualify for the Section 179 Deduction.
  • Used Equipment
    Used Equipment (that is new to you) qualifies for Section 179, however used equipment does not qualify for Bonus Depreciation.