Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year. Section 179 isn’t a new tax credit, but it changes pretty frequently and can be difficult to keep track of. It was created to encourage small businesses to spend and invest in themselves, and 70 percent of small business owners plan to take advantage of it this year.

2018 Section 179 tax benefits

This year, the total deduction amount has been increased to $1,000,000 with a total investment limit of $2.5 million. This is double the amount offered last year, and the highest it has ever been. Because Section 179 is adjusted so often, there is no guarantee that these benefits will last. Those planning on making equipment purchases should take full advantage of this tax deduction while it’s still available.

For example, a plumber who spent $50,000 on new drain cleaning equipment can use Section 179 to write off the entire purchase price for the current tax year. If he’s in the 35 percent tax bracket, he’ll get $17,500 back in his pocket. In years past, when he bought qualifying equipment for his business, he could only write it off a little at a time through depreciation.

Tip: Remember, all businesses are unique. Talk to a tax professional or accountant before making any decisions.

Section 179 tax credit qualifications

Between computers, cable machines and plumbing tools, it takes a lot of different equipment to keep your business running. When assessing your business purchases, there are a few things to keep in mind:

• Timeframe. In order to qualify for the 2018 Section 179 tax credit, a purchase must be made and put into use between Jan. 1 and Dec. 31, 2018.
• Amount of business use. Any purchases made must be used for business purposes over 50 percent of the time. Equipment that is used entirely for business purposes is eligible for a full price deduction. To calculate your deduction for purchases that are also used outside of your business, multiply the original cost by the percentage of business use. For example, the deduction for a $1,000 computer that’s used 70 percent for business and 30 percent for personal use would be $700.
• Used purchases. Any equipment that’s new to the business owner can qualify; this includes used equipment as long as it was purchased from the previous owner in 2018.

Tip: Curious about your potential deduction? Take a look at all of your qualifying business purchases and simply calculate your potential deduction.

When figuring out the best time to purchase new equipment for your business, take its tax implications into consideration. That new drain cable machine you’ve been eyeing could help decrease your total tax burden, while helping you sustain and grow your business. The purchases you’re putting off until next year may make more financial sense this year. Ready to check out some equipment for your plumbing and drain cleaning business? Shop now.