As we approach the end of the year, don’t forget to utilize Section 179 of the IRS Tax Code. According to the IRS under the 2018 tax reform, and subject to limitations, businesses are now able to deduct the full purchase price for qualifying equipment – yes, that could include the Kubota you purchased in 2022! We can thank Uncle Sam for putting this tax code into place as an incentive for businesses to purchase equipment and invest in themselves. Prior to the reform, the most businesses were allowed to deduct was a small portion of each qualifying equipment’s value based on depreciation, literally taking it years to complete. Now, Section 179 allows businesses to deduct the full purchase price in the year the qualifying equipment was put to use for your business. According to Section179.org, this includes qualifying equipment that was purchased in-full, as well as financed. If you purchased a piece of equipment in 2022, be sure to check with your CPA or tax preparer about deducting that full amount, as well as eligibility for a bonus depreciation.
Buy Early. If you want to take advantage of the Section 179 benefits, it’s important to note that in order for equipment purchased in 2022 to qualify it must be put to use in 2022 for your business as well. We know it’s common practice to purchase equipment in the fourth quarter of the year, but don’t delay because equipment that is simply purchased but just sits brand new on your lot may not qualify until the year it is put into service.
Limitations. Section 179 comes with limits – there are caps to the total amount written off ($1,080,000 for 2022), and limits to the total amount of the equipment purchased ($2,700,000 in 2022). Be sure to discuss these limits with your tax preparer to see how your business qualifies.
What you need to bring to your Tax Appointment. If you purchased equipment in 2022, you will need records on the date of purchase, the date you started using the equipment, and all costs associated with the purchase, like shipping and setup. If you lost any of this documentation, check with your Kubota Dealer to get a copy. Your tax preparer can take the Section 179 deduction on certain qualifying business property by electing it, which is done by filling out the required form and including with your business tax return. Please consult with your certified tax professional for eligibility and limitations that apply to you.
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This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.