Section 179 in 2014

Update on the 2014 Section 179 Tax Deduction

You still have thirty days to make the most of $25K

Section 179 of the IRS tax code has gotten a lot of heat for its diminished deduction limit in 2014. Compared to last year’s deduction limit of $500,000 for equipment purchases, the 2014 limit has been reduced to $25,000. Despite the ADA’s efforts in urging Congress to extend the Section 179 tax provision to 2013 levels, there hasn’t been any word on whether an extension will be granted.

The silver lining: although $25,000 isn’t as desirable as $500,000, Section 179 provides some real relief to dental practice owners purchasing small equipment in 2014. Section 179 can change each year without notice, so it’s beneficial to take advantage of any deduction while it’s still available.

Up to $25,000 in dental equipment can be written off in 2014

ELIGIBILITY AND QUALIFICATIONS

Most tangible goods qualify for the Section 179 Deduction. For basic guidelines on what equipment is covered under the Section 179 tax code, refer to this list of qualifying equipment. Note: To qualify for the Section 179 Deduction, the equipment and/or software purchased or financed must be placed into service between January 1, 2014 and December 31, 2014.

All new and used equipment is eligible for deduction up to $25,000 for 2014. All companies that lease, finance or purchase equipment with a total value of less than $200,000 still qualify for the Section 179 deduction. Expenses over that maximum amount begin to decrease on a dollar-for-dollar deduction scale, effectively gearing this tax code toward small and medium-sized businesses.

DEPRECIATION DEDUCTION BENEFITS

While Section 179 doesn’t increase the total amount you can deduct in a single year, it allows you to benefit from the deduction all at once. In other words, rather than having to deduct an asset’s value over the course of several years, Section 179 allows businesses to get the entire depreciation deduction in a single year, a practice known as first-year expensing.

According to regular depreciation rules, if you were to purchase new high-speed handpieces for each of your operatories, you’d be obligated to deduct a portion of each handpiece’s cost over multiple years. For the next five years, you’d only be able to deduct a fraction of the overall expense. With the Section 179 tax code, though, you are allowed to immediately deduct the entire expense of the handpieces in a single year instead of having to track their depreciation over time.

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Check out an example of Section 179 at work:

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 SOURCE: Section179.org