How to Determine If Your Small Business is 6765 Eligible

As a small business owner, you must always keep an eye out for the various tax breaks and benefits that apply to your business. One particular benefit that could bring significant savings to your small business is Section 179 of the Internal Revenue Code. Section 179 allows you to deduct the full cost of qualifying equipment and software purchases from your taxes for the year in which it was put into service. This article will help you determine if your small business is 6765 eligible for Section 179 deductions.

To start, you need to know the types of property that qualify under Section 179. The list includes tangible personal property such as machinery, equipment, computers, furniture, and certain improvements to non-residential property. The improvement must be made to an existing commercial structure, and the improvement must meet specific standards of energy-efficient property. Real estate property, such as buildings or land, is not eligible for the Section 179 deduction.

The next step is to determine if your small business has reached the annual limit for Section 179 deductions. For 2021, the annual limit for Section 179 deductions is $1,050,000. Your small business can claim the full $1,050,000 if you have purchased $2,620,000 or less of qualifying property in the current year.

If your small business has purchased property more than the annual limit, the deduction begins to phase out. The phase-out threshold for Section 179 starts at $2,620,000 and completes at $3,670,000. Once your business crosses the $3,670,000 threshold, the deduction is entirely phased out.

It’s essential to note that the Section 179 deduction cannot exceed the taxable income of your small business. If your small business’s total income is $500,000, the maximum deduction you can take under Section 179 is $500,000.

Another key consideration with Section 179 is that it’s only available for property bought and put into use in the same year. However, the Tax Cuts and Jobs Act of 2017, which went into effect in 2018, allows for “bonus depreciation.” This means that you can take a 100% depreciation deduction on new and used qualifying property in the year it was purchased – even if it was put into service at a later date.

In conclusion, determining whether your small business is 6765 eligible for Section 179 is crucial to ensure you are not leaving money on the table. Remember that Section 179 is only for business equipment and software purchases and that there are annual limits and other thresholds to be mindful of. If you’d like to make the most of your business deductions, consult with a tax professional or advisor before making any purchase decisions.