Property that Qualifies

Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. Understanding what qualifies for Section 179 can help your business take full advantage of this tax incentive.

Explanation of the “More Than 50% Business Use” Rule

For property to qualify for Section 179, it must be used more than 50% for business purposes. If the usage falls below 100%, the deduction decreases proportionally.

The Importance of Keeping Records for Business Usage

Maintaining accurate records of how property is used is essential for substantiating claims for Section 179 deductions and ensuring compliance with tax laws.

“New to You” Concept – Used or New Property

Section 179 applies to property that is “new to you”, meaning it can be brand new or used, but it must be a new acquisition to your business and put into service in the tax year you’re claiming the deduction.

Restrictions on Property Acquired from Related Parties

Property acquired from related parties or by inheritance does not qualify for Section 179 Deduction.

To qualify for the Section 179 deduction, property must meet all the following requirements:

• It must be eligible property.

• It must be acquired for business use.

• It must have been acquired by purchase or Section 179 Qualified Financing.

• It must not be property described under “What Property Does Not Qualify“.

• Example types of property that can be claimed under Section 179 include:

• 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

• Computers

• “Off-the-Shelf” Software

• Office Furniture

• Office Equipment

• Property attached to your building that is not a structural component of the building (i.e.: a printing press, large manufacturing tools and equipment)

• Partial Business Use (equipment that is purchased for business use and personal use: generally, your deduction will be based on the percentage of time you use the equipment for business purposes)

• Certain improvements to existing non-residential buildings: fire suppression, alarms and security systems, HVAC, and roofing.

These items can be financed with ‘Section 179 Qualified Financing’, purchased outright, or leased under a capitalized lease, and must be new to your business and put into service in the tax year you’re claiming the deduction.

There are annual dollar limits on the total amount that can be deducted under Section 179, as well as investment thresholds that reduce the deduction amount.

Listed property includes assets that can be used for both personal and business purposes, such as cameras and laptops. Stricter record-keeping and usage requirements apply to listed property.

Please note that this is a general summary of the types of property that qualify for the Section 179 deduction. For more specific information or advice related to your individual situation, you should consult with a tax professional or refer to the IRS guidelines.