Section 179 of the Internal Revenue Code is a tax deduction that allows businesses to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year. The deduction is meant to encourage businesses to invest in themselves by purchasing new equipment and technology. However, there has been some speculation that Section 179 may be going away in 2023. In this article, we’ll explore the current state of Section 179 and what changes, if any, may be on the horizon.
Before we delve into the possibility of Section 179 going away in 2023, it’s important to understand how it currently works. Under the current law, businesses can deduct up to $1,050,000 of the cost of qualifying equipment and software purchased or financed during the tax year. This deduction is available to businesses that spend less than $2,620,000 on new or used equipment during the tax year. Any amount above $2,620,000 will reduce the deduction dollar for dollar.
Why Some People Believe Section 179 May Be Going Away
Despite the popularity of Section 179, there are some who believe that it may be going away in 2023. The reason for this speculation is due to the Tax Cuts and Jobs Act (TCJA), which was signed into law by President Trump in 2017. The TCJA increased the Section 179 deduction limit from $500,000 to the current $1,050,000. However, this increase was only temporary and is set to expire at the end of 2022. Some people believe that this expiration means that Section 179 will be going away entirely in 2023. However, this is not necessarily the case.
The Future of Section 179
While the expiration of the increased deduction limit may seem worrisome, it’s important to note that Congress has a history of extending or making permanent temporary tax provisions. In fact, the deduction limit for Section 179 was only $25,000 in the early 2000s but has since been increased several times. Additionally, there is bipartisan support for Section 179, as it is seen as a way to encourage small business growth and investment. Therefore, it’s likely that Congress will either extend the increased deduction limit or make it permanent before it expires at the end of 2022.
Benefits of Section 179
Whether or not Section 179 goes away in 2023, there’s no denying the benefits it currently provides to businesses. Here are some of the key advantages of Section 179:
- Immediate tax savings: The ability to deduct the full purchase price of qualifying equipment and software in the current tax year can provide significant tax savings for businesses.
- Increased cash flow: Deducting the full purchase price of equipment and software can also help businesses conserve cash flow by reducing the amount of taxes owed.
- Encourages investment: Section 179 is designed to encourage businesses to invest in themselves by purchasing new equipment and technology, which can help them grow and become more competitive.
While there is some speculation that Section 179 may be going away in 2023, it’s important to understand that this is not a foregone conclusion. Congress has a history of extending or making permanent temporary tax provisions, and there is bipartisan support for Section 179. Therefore, it’s likely that the deduction limit will either be extended or made permanent before it expires at the end of 2022. Regardless of what happens in the future, Section 179 currently provides significant tax savings and encourages businesses to invest in themselves, which are both important benefits for small businesses and the economy as a whole.