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Tax Incentives

Section 179 Tax Deduction for 2021

Section 179 Tax Deduction, New changes for 2022

Here’s what you need to know for the current tax year, and a sample calculation to show how much we can help you save.

  • New deduction limit for 2022 is $1,050,000.
  • Spending cap on equipment purchases is $2,620,000 (deduction starts phasing out on a dollar-for-dollar basis after the cap is hit.
  • Bonus depreciation is 100% and can be used on new and used equipment.

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$1,150,000Equipment Purchases
qualifying new or used
$1,050,000First Year Write Off
$1,050,000 maximum for 2021
$100,000100% Bonus
first year depreciation
$0Normal First Year Depreciation
20% in each of the first 5 years
$1,150,000Total First Year Deduction
$1,050,000 + $100,00 + $0
$402,500Cash Savings
$1,150,000 x 35% tax rate
$747,500Equipment Cost after Tax
assuming 35% tax bracket
$746,350 Total Savings
Section 179 Sample Calculation

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Here’s How Section 179 works

In years past, when your business bought qualifying equipment, it typically wrote it off a little at a time through depreciation. In other words, if your company spends $50,000 on a machine, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example).

Now, while it’s true that this is better than no write-off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it.

And that’s exactly what Section 179 does – it allows your business to write off the entire purchase price of qualifying equipment for the current tax year.

This has made a big difference for many companies (and the economy in general.) Businesses have used Section 179 to purchase needed equipment right now, instead of waiting. For most small businesses, the entire cost of qualifying equipment can be written-off on the 2021 tax return (up to $1,050,000).

Limits of Section 179

Section 179 does come with limits – there are caps to the total amount written off ($1,050,000 for 2021), and limits to the total amount of the equipment purchased ($2,620,000 in 2021).

The deduction begins to phase out on a dollar-for-dollar basis after $2,620,000 is spent by a given business (thus, the entire deduction goes away once $3,670,000 in purchases is reached), so this makes it a true small and medium-sized business deduction.

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