2020 Section 179 Updates & Deduction Guide

Section 179. It’s tricky. We’ve put together a guide that you can read and easily understand. Here’s a rundown of all the things you need to know about the 2020 election, COVID-19, and all the particulars about what types of investments qualify for the Section 179 deduction.

How Does COVID-19 Affect Section 179?

Simply put, COVID-19 can’t mess with your deductions. If your company received a PPP loan or any other Pandemic-related assistance, you may still claim your Section 179 deduction. Section 179 also allows deductions for “tangible business equipment purchased to modify businesses and/or to conform with COVID-19 restrictions and measures.” If you’re not sure whether your equipment qualifies based on these criteria, read on for more information on deductible equipment and, when in down, always consult your tax professional.

How Will the 2020 Election Affect Future Section 179 Deductions?

For the current tax year (2020), the election will have no effect. Depending on the outcome of the election, a reelected or new president could introduce an agenda that affects the tax code in terms of the amount of deductions available to small businesses. And there could be another pandemic stimulus package to consider.
That said, Section 179 can’t be leveraged by larger businesses that spend $3,630,000 or more on equipment.

What Kind of Fleet Management Equipment is Deductible Under Section 179?

Categorically, there are several types of material property that may qualify for deductions under Section 179:
· Software
· Hardware
· Vehicles
· Property
· Related costs

What is the 2020 Spending Cap for Section 179?

The 2020 spending cap on equipment purchases is $2,590,000.

What is the 2020 Deduction Limit for Section 179?

The 2020 deduction limit is $1,040,000.

What is the 2020 Bonus Depreciation for Section 179?

After the spending cap is met, bonus depreciation may be taken and allows for depreciable business assets that have a recovery period of 20 years or less to be immediately deducted for the tax year it was put into service.

When must qualifying purchases be made to get the Section 179 Deduction?

To qualify for the section 179 deduction, your purchases must be made between January 1, 2 020 and December 31, 2020.

Where Can I Read the Tax Code for Section 179?

The standard language for Section 179 and the whole tax code can be found here, and here’s the IRS form 4562 for filing deductions.

Qualifying Questions to Help Determine Deductions Under Section 179

Hardware & Software

For most business applications, you can deduct your financed computers, hardware, and most software—provided that it conforms to IRS guidelines.

Here are a few quick questions you can ask to figure out if your software qualifies for a deduction. If the answer is “YES” to all of these, you’re probably in the clear!

· Software that is not custom designed and
· Is available to the general public
· And will be used for income-producing activities

Vehicles

If you purchased a vehicle that will be used for business 50% or more of the time, keep these qualifying parameters in mind if you’re wondering what fleet vehicles are deductible:
Vehicles with the capacity to carry 9 or more passengers, not including the driver.
Cargo vans or vehicles that have a fully-enclosed driver’s compartment or cargo area, no seating at all behind the driver’s seat and no passenger section within 30 inches of the leading edge of the windshield.
Heavy construction equipment, including forklifts, etc.
Most “over-the-road” Tractor Trailers.

Property

Most of the “things” you’d invest in to support your business can qualify for including:
· Office equipment & machines
· Office furniture
· Computers
· Large equipment that isn’t a structural component of your building (e.g., a printing press)

Deductible Costs

These deductions may include certain improvements to existing non-residential buildings: fire suppression, alarms and security systems, HVAC, and roofing.

Use an Estimator for Section 179 Deductions

If you’re trying to figure out how much you could save, the go-to resource is this free calculator from Section179.org.