Warehouse expenses can quickly and easily add up. However, did you know that warehouse owners are eligible for tax deductions when purchasing property, such as machinery or vehicles?
The Section 179 deduction of the U.S. internal revenue code allows businesses, including Florida warehouses, to reduce the acquisition cost of qualifying equipment by deducting it on their income taxes as an expense, rather than allowing the cost of the property to be capitalized and depreciated.
Find out how taking advantage of Section 179 can help with warehouse budgeting and benefit your business!
What is a Section 179 Deduction?
Section 179 of the IRS Tax Code allows a business to deduct, for the current tax year, the full purchase price of equipment and off-the-shelf software that qualifies for the deduction.
The Section 179 limit for 2020 allows for up to $1,040,000 in eligible equipment to be deducted, and the ‘total equipment purchased’ by a business cannot exceed $2,590,000. Once the equipment purchased exceeds that number, the deduction reduces on a dollar for dollar basis.
What Qualifies as a Section 179 Expense?
Most warehouse equipment that warehouses either purchase or lease can qualify for the Section 179 deduction. The official website for Section 179 offers a list of qualifying equipment, including items such as:
- Equipment (machines, etc.) purchased for business use
- Tangible personal property used in business
- Business Vehicles with a gross vehicle weight in excess of 6,000 lbs. (see Section 179 Vehicle Deductions)
- Computers and software
- Office Furniture & equipment
- Large manufacturing tools and equipment
- Enhancements of residential buildings, such as fire suppression, alarms and security systems, HVAC, and roofing
It’s important to note that this equipment expense deduction can be applied regardless of whether the item was purchased, leased, or financed — and it applies to both new and used items. However, keep in mind that the equipment must be purchased and put in use between January 1 and December 31 of the tax year you are claiming to receive the Section 179 tax deduction. Looking for a new piece of equipment for your facility? Request a free quote from our wide inventory today!
What the Advantage of Tax Code 179 Could Mean for Your Warehouse
Tax code 179 allows businesses to lower their current-year tax liability rather than capitalizing an asset and depreciating it over time in future tax years with a maximum deduction of $1,040,000.
Taking advantage of the Section 179 can exponentially lower warehouse expenses for purchased, leased, or financed equipment. For example, after applying the deduction on your taxes, $50,000 in equipment purchased would have a true cost of $32,500. The Section 179 Tax deduction saves you $17,500, which can easily be used for other warehouse expenses or improvements.
How to Calculate Section 179 Deduction for Your Warehouse
By taking advantage of the Section 179 deduction, Florida warehouses can make a large impact on their equipment costs. Want to calculate how much Section 179 can deduct from your warehouse expenses? Here’s an easy-to-use calculator that will help you estimate your tax savings.
Simply enter in the purchase price of your equipment, software, or other qualifying purchases and the calculator will take care of the rest.
How to File Your Section 179 Deduction
Remember that Section 179 always expires at midnight, December 31st. There is still time left in 2020 to take advantage of Section 179! To do so, you must buy, lease, or finance your equipment and put it into use by December 31 of this year.
You can elect to take the Section 179 deduction when you file your tax return for the year, whether you are filing on time or received an extension. The process is the same whether you paid cash or used Section 179 Qualified Financing.
To elect to take the Section 179 Deduction, simply fill out Part 1 of IRS form 4562, and attach it to your tax return.
Remember, it’s always the best policy to consult with your own accountants or tax professional before you purchase equipment to take advantage of the cost savings benefits of tax code 179.
If you have any questions about how to receive the benefits of Section 179 deductions before the December 31 deadline, contact Southern States Enterprises today.
If you're ready to buy, lease, or finance new equipment for your warehouse before the December 31, 2020 cutoff, request a warehouse equipment quote before it's too late!
