The IRS Section 179 Deductions for Equipment and Software write-offs have increased for 2023.
- 2023 Deduction Limit = $1,160,000
- 2023 Spending Cap = $2,890,000
- Bonus Depreciation = 80%
Businesses can write off even more for their equipment and software purchases on their 2023 taxes. This deduction is particularly good for small and medium-sized businesses.
Bonus depreciation has decreased from 100% in 2022 to 80% in 2023. Next year it goes down to 60% and so on. This impacts larger purchases and the amount your customers can write off in the first year.
The IRS Section 179 deduction is a great way of reducing the overall cost of your customers’ purchases and can make it easier for you to close a deal. Give me a call if you have any questions.
2023 IRS Section 179 Deduction
The IRS Section 179 Deduction is ideal for small to medium-sized businesses. It allows businesses to write off equipment and software purchases as a tax incentive.
2023 IRS Section 179 At a Glance
The following is an overall, “simplified” view of the IRS Section 179 Deduction for 2023. For more details on limits and qualifying equipment, as well as IRS Section 179 Qualified Financing, please read this entire page carefully.
2023 DEDUCTION LIMIT
This deduction is good on new and used equipment, as well as off-the-shelf software. This limit is only good for 2023, and the equipment must be financed/purchased and put into service by the end of the day, 12/31/2023.
2023 SPENDING CAP
This is the maximum amount that can be spent on equipment before the IRS Section 179 Deduction available to your company begins to be reduced on a dollar for dollar basis. This spending cap makes Section 179 a true “small business tax incentive”.
Bonus Depreciation is generally taken after the IRS Section 179 Spending Cap is reached.
Essentially, IRS Section 179 Works Like This
When your business buys certain items of equipment, it typically gets to write them 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.
In fact, if a business could write off the entire amount, they might add more equipment this year instead of waiting over the next few years. That’s the whole purpose behind IRS Section 179 – to motivate the American economy (and your business) to move in a positive direction. For most small businesses, the entire cost can be written-off on the 2023 tax return (up to $1,160,000).
Recent Changes to IRS Section 179
New in 2020, qualified nonresidential real property improvements can also be claimed under Section 179. This includes:
- interior improvements
- new roofs
- HVAC systems
- fire and alarm systems
- security systems.
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