2023 Section 179 Tax Incentives for New & Used Capital Equipment
80% of equipment and off-the-shelf software purchased and put into service in 2023 is tax-deductible.
This year, Section 179 of the IRS tax code allows businesses to deduct the up to $1.16 million of qualifying equipment purchased and placed into service during the tax year. Expensing the full amount of the purchase, as opposed to deducting depreciation over multiple years, can greatly reduce taxes owed.
In addition, Bonus Depreciation [Section 168(k)] allows taxpayers additional benefits if the Section 179 purchase allowance of $1.16 million is exceeded. These incentives can help your bottom line and are easy to take advantage of, as long as equipment is purchased and placed into service by the end of the year.
Tax Benefits Breakdown for Flow-Through Company
(Sole Proprietors, Partnerships, S-Corporations Taxed at 32%)
Companies can deduct equipment purchases from their taxable income. For 2023, the annual deduction limit is $1,160,000 for companies purchasing or leasing up to $2,890,000 of equipment. This deduction phases out dollar for dollar from $2,890,000 to $4,050,000 and is not available for companies purchasing over $4,050,000 in equipment. Bonus depreciation is taken after the Section 179 deduction limit has been reached. Schedule: 80% 2023; 60% 2024; 40% 2025; 20% 2026
Equipment Cost | Section 179 Deduct | Bonus Depreciation | First Year Deduction | Total Tax Benefit* |
$1,250,000 | $1,160,000 | $72,000 | $1,232,000 | $394,240 |
Tax Benefits Breakdowns for C-Corporations (Taxed at 21%)
Companies can deduct equipment purchases from their taxable income. For 2023, the annual limit has increased to $1,160,000. Companies purchasing or leasing up to $2,890,000 of equipment qualify for the deduction each year. Bonus Depreciation allows businesses to immediately deduct 80% of the cost of eligible property in the year it is placed in service. Bonus Depreciation is available for use on both new and used equipment purchase.
Equipment Cost | Section 179 Deduct | Bonus Depreciation | First Year Deduction | Total Tax Benefit* |
$1,500,000 | $1,160,000 | $272,000 | $1,432,000 | $300,720 |
* All subject to IRS limitations. Consult your tax advisor to determine the availability of these potential benefits in your particular tax situation. To ensure compliance with requirements imposed by the IRS, we inform you that, unless expressly stated otherwise, any U.S. Federal tax advice contained in this communication (including any appendages hereto) is not intended or written to be used, and cannot be used, for the purpose of: (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed therein.