Section 179 FAQ for 2024

Realizing the need to offer unique tax benefits for US businesses, the IRS created the Section 179 tax deduction as part of the Economic Recovery Tax Act. It allows business owners to deduct the price of qualifying equipment, vehicles, and software in the year it is purchased or financed and put into service.

In 2024, the Section 179 deduction limit for qualifying equipment purchases is $1,220,000, and the phase-out threshold is $3,050,000.¹

Equipment that qualifies for a Section 179 deduction includes computers, software, office furniture, office fixtures, and business vehicles that weigh 6,000 pounds or more. Used business equipment is also eligible. Balboa Capital recommends that you consult your accountant or tax professional to determine if the equipment you want qualifies.

To take advantage of the Section 179 deduction, you must purchase or finance qualifying equipment and put it into service by midnight, December 31st, when you elect to take a deduction.

If your goal is to minimize your taxable income for the year you purchase or finance qualifying new or used business equipment, Section 179 is a good idea.

Every business has its unique financial situation, and not all equipment is eligible for Section 179. However, you can see estimated deduction amounts with this Section 179 calculator.

Bonus depreciation is a unique income tax deduction that allows business owners to recoup the purchase price of qualified new equipment over several years. Depending on the specific type of equipment, there is an annual allowance for depreciation. In 2024, bonus depreciation is 60% for equipment placed into service from January 1, 2024, through December 31, 2024.²

No. You need to elect the Section 179 tax deduction. To do this, you must complete IRS Form 4562 and include it in your business tax return. It is a good idea to work with a CPA to ensure that all your information is accurate.

Yes. Section 179 works with equipment financing. However, the equipment must qualify for Section 179, so make sure you contact your small business accountant before financing the equipment.

The Section 179 carryover comes in handy if you reach your maximum deduction amount for the year. If this happens, you might be able to carry over the amount to the following year. Here is an example of the Section 179 carryover: If a small business takes $100,000 of Section 179 deduction and has $60,000 of taxable income before the deduction, $40,000 ($100,000 minus $60,000) can be carried forward next year. Ask your accountant about the Section 179 carryover, as each business owner’s situation is unique.

References:
1, 2 – https://hoodcpas.com/understanding-tax-depreciation-rules-for-2023-and-2024-bonus-depreciation-section-179-explained/

Section 179 limits and information on the Balboa Capital website are for illustrative purposes only; the Section 179 limits and information provided are subject to change by the IRS. Please visit the IRS website or consult a qualified tax professional for confirmation of the current Section 179 limits and information related to your situation.