What is Section 179?
Section 179 allows a business to write off the entire depreciation of a purchased asset in the year it was purchased, effectively reducing the purchase price by way of lowering tax liability.
For instance, say that an owner-operator purchases a truck for $50,000 and has a marginal tax rate of 35%. By using Section 179, he frontloads the depreciation of the truck and lowers his tax liability by 17,500, effectively paying $32,500 for the truck instead.
The amount a business may claim under Section 179 deduction has an annual limit. For 2023, the deduction limit is $1,160,000 (an increase of $80,000 from last year) and the spending cap for which Section 179 can be applied is $2,890,000 ($190,000 higher than last year).
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