Electing the Deduction

If you are a small or medium-sized business owner who has purchased, financed or leased equipment and placed it into service during the calendar year, then you need to elect to take the Section 179 Deduction to ensure that your business captures the available tax savings (it is not automatic – you must elect to take it).

Fortunately, electing to take the 179 Deduction is very easy:

You elect to take the deduction when you file your tax return for the year, whether you are filing on time or received an extension. It also doesn’t matter how you bought the equipment – whether you paid cash or used Section 179 Qualified Financing, the process is the same.

To elect to take the Section 179 Deduction, simply fill out Part 1 of IRS form 4562, available for free below, and attach it to your tax return (much like any other additional form, such as a “Schedule C” or similar).

Download IRS form 4562

Download instructions for IRS form 4562

*Note: Both forms above may show prior years. Despite that, they are the most current forms.

If you do not feel comfortable completing the form yourself, your tax preparer can easily take care of form 4562 for you. Your tax preparer may also be able to advise you of additional Section 179 Deduction and Bonus Depreciation savings that may be available to you.

As we mentioned previously, most equipment as well as off-the-shelf software that you purchase, finance or lease for business-use is going to qualify for the Section 179 Deduction. You can verify whether or not the business equipment that you have purchased or leased qualifies for the Section 179 Deduction by reviewing our list of Section 179 qualifying equipment.

The Section 179 is taken on an item by item basis, and you do not have to use it on all eligible property bought during the year if you do not wish to do so.

You may claim Section 179 deductions up to the due date (including extensions) for filing your taxes for the tax year you are claiming the deduction. Initially you were not allowed to claim Section 179 for previous tax years – however, under Rev. Proc. 2008-54 you are now able to amend and elect Section 179 if you previously did not for tax years beginning after 2007 through the current year.

You must keep complete records of the business equipment you leased or purchased during the year, including where you acquired the equipment from and the date the equipment was acquired and placed into service. If filing for any particular year, the equipment must have been leased or purchased and placed into service between January 1 and December 31 of the year you are filing for.