Section 179: As It Applies to Window Machinery
As a business owner, you know the importance of deducting your expenses. Without the proper deduction, you may end up paying more than your fair share of taxes. The result can be pretty painful, so understanding all of your options is pretty important.
One solution comes to us in the form of Section 179. In this article, we plan on telling you how your used window equipment applies to this deduction.
What Does Section 179 Do?
Section 179 is an immediate expense deduction that operates faster than standard straight-line deductions or your alternative deduction forms.
It allows you to expense off the qualified property immediately. That means if you purchased a $200 machine last year, you could expense all of it off when you do your taxes this year.
With the 2017 Tax Cuts and Jobs Act, the program has further improvements. Here’s how Section 179 changes in 2021:
A Higher Expense Deduction from the Previous Year
The previous year allowed medium to small businesses to expense tangible property up to $1,040,000. This year, the program has been increased by about $10 thousand. That means the ability to chop down your taxable income even further.
The increased dollar limitation doesn’t seem like much. However, small to medium-sized businesses will appreciate the slight increase. That makes 2021 an excellent year to invest further into your window machinery business.
An Extra Bonus Depreciation from Last Year
Previous years gave a bonus depreciation of 50% of the purchase of personal property used in your business 50% (or more) of the time. That means you could purchase a new utility vehicle to transport windows and expense half of the costs in the same year.
In 2021, that number increased to allow for 100% bonus depreciation for both new and used equipment. So that means instead of expensing half, you expense all of it.
What Property Qualifies Under Section 179?
Section 179 exists for the sole purpose of encouraging companies to invest in new equipment. Equipment, according to the written law, refers to two different categories:
- Real property (tangible property)
- Computer software
Let’s dig into the qualifications behind these two categories:
What is Real Property Under Section 179?
Real property sounds a bit silly. After all, trying to expense fake property sounds like how to get jailed for tax evasion. However, there is a basic definition for what Section 179 refers to as qualified property.
The definition is vague enough to refer to nearly everything. This subject can include anything from a new coffee machine for the break room to a new glass cleaning machine for your customers.
There’s also allowance for expensing qualified improvement property. This type of property applies to two things:
- Improvements made to a residential location you rent out.
- Improvements made to a nonresidential site your business uses.
It could refer to anything from equipment purchased to make the improvements to the materials. This expense also refers to the new roof, new walls, or new bathroom.
If it is something you can expense under standard depreciation protocol, it applies here. The situation changes when we refer to computer software.
How Does Computer Software Fall Under Section 179?
A modern form of glass machinery requires specific computer programs with blueprint data. But which of those fall under section 179? The answer to that question depends on a couple of things:
- Is it available for purchase by the general public?
- Is the data inside of the program part of a public domain?
These two questions are important because a computer program that your company modified for their uses doesn’t qualify. A revised program is nearly impossible to value.
So it means that your program needs to have defined public value. That means you cannot expense personal data (like your list of customers) if lost. However, the software used to store that customer data is tax-deductible.
This limit can be frustrating if you value programmed window schematics. However, it is an important note given how difficult these things are to appreciate.
How Do Vehicles Apply to Section 179?
Automobiles you purchase for any business purpose also apply the same as any equipment purchase would. The maximum deduction for vehicles applies to equipment, so don’t expect to expense them under two different million-dollar brackets.
In this case, a vehicle is a piece of equipment, so your cars should be for business use. To address those who might expense off personal use vehicles, sport utility vehicles (SUVs) are subject to a $25 thousand limit.
However, a large truck you use to haul glass machinery or panes can easily be a business expense. Anything over the limit applies as bonus depreciation.
What are Some Examples of Real Property that Applies to Section 179?
Section 179 is relatively vague when it comes to taxpayers. Here’s a list of different expenses that apply to your business:
- A new security system (or fire alarm system)
- A cargo truck that holds up to nine passengers
- A personal computer that you use for business 75% of the time.
- Air conditioning property you upgraded in the building
- The cost of a new forklift.
- New office equipment, including computers, desks, or other items.
- Manufacturing equipment that you use to increase window production.
- The computer software that helps you track expenses.
Provided that you use it for your business, you can expense many things using Section 179.
Your business tax return is already pretty tricky. Thankfully, Section 179 is one of the simpler forms to deal with regarding taxes. If there are new purchases, you would generally expense over several years. Section 179 allows you to expense them with rapidness. Given all of the potential expenses in the window production industry, that’s one less weight off of your shoulders.
If you are looking to buy new or used equipment, Section 179 allows you to expense it off during the following tax year. Consider Window Machinery Direct as your one-stop shop for everything from financing to getting high-quality equipment if you are looking for used window equipment.