Have You Ever Heard of Section 179?
If you tried to compile a list of all the things in the world that are less exciting than reading about tax codes, you’d find a bigger struggle than it might seem at first glance. Most of us would rather read a 500 page book offering the detailed and complete history of paper towels than a few hundred words about tax codes. Most of us hear the phrase “Section 179,” and our interest ends right there.
But what if I told you that Section 179 is actually an exciting piece of tax legislation? What if I told you it can benefit your business directly? What if I told you it involves both pirates and aliens? Yeah, you read that right. We’ll get to them a bit later.
A surprising number of small business owners have never heard of IRS Section 179 and have no idea what it’s all about. And that’s a big shame, given how invaluable it can be when tax time rolls around.
Let’s chat about this impressive tax code and the benefits your small business can reap from it. And when you’re done here, be sure to talk with your accountant or tax advisor about section 179 and see just how much your business can put it to good use, too.
What is Section 179?
We’re not tax experts by any means, so we’re not going to go into a lengthy explanation of IRS section 179 or how it works. We aren’t interested in trying to overwhelm you with a bunch of accounting jargon or legal mumbo jumbo, either. So let’s just break this down in plain English, shall we?
Section 179 allows you to write off certain business expenses in one big shot, rather than having to do that through depreciation. This includes things like equipment, building upgrades, and even vehicles—hence it being known as the “Hummer Loophole,” since some business owners used it in the past to write off big expensive SUVs.
Of course, section 179 is useful for a whole lot more than just vehicles. It covers a wide range of items small businesses utilize, from computers to furniture to massive printing presses and heavy manufacturing equipment.
How Does This Tax Code Benefit Your Event and Party Rental Business?
Under this tax code, you can write off up to $1,000,000 worth of equipment purchases made in 2019. And that can be a huge win for companies operating within the event and party rental industry.
Bounce houses, inflatable water slides, inflatable obstacle courses, zorb balls, party tents, folding tables … all of those things can be written off as section 179 deductions. Vehicles weighing over 6,000 pounds purchased in fiscal year 2019 count as well, and given so many companies in this industry require large trucks and vans to move their valuable equipment around, that can be hugely beneficial.
Remember when I mentioned earlier that this tax code also somehow involved pirates and aliens? Here’s where they come into play. You could buy a Deluxe Pirate Ship Bouncer or a fun alien themed sealed air frame game and write them off as business expenses under Section 179.
Okay, I’ll admit it: it was pretty misleading to say that any of this involved pirates and aliens. I may have only said that to keep you reading long enough to show you how useful this tax code is. But it was for a worthy cause. How many of you didn’t know about these deductions before today? Would you have kept reading had I not mentioned them? Some of you would’ve stopped back there!.
Here’s a full list of what is allowed for deductions under Section 179, and here’s a full list of what isn’t allowed. Read these lists carefully and discuss how to move forward with a tax expert, accountant, or financial advisor. The benefits for most companies can be tremendous.
There’s Still Time to Shop with Section 179 in Mind!
Section 179 applies to equipment purchases made in fiscal year 2019. That means all of the qualifying equipment you’ve purchased between January 1st 2019 and December 31st 2019 is eligible for deductions. Even equipment you purchase using Tent and Table's equipment financing options are eligible.
There are some limitations, of course. You can spend anywhere up to $2.5 million on section 179 equipment, though everything over $1 million will see reduced deductions. You can depreciate costs beyond that, but that’s a complicated subject that goes well beyond the scope of this article. Ask your tax professional about depreciation and how it can apply to your equipment.
All of that having been said, there’s still plenty of time left to buy equipment worthy of a section 179 deduction. Keep an eye on Tent and Table for exciting sales throughout the holidays and consult with your tax experts to put those sales and Section 179 to good use!