The deduction we’re referring to is Section 179, which isn’t new, and you’ve most likely deducted something under 179 before, but recently the terms have changed regarding what and how much. It’s here to help smaller and midsize businesses so they can add value to their company.
What is eligible for deduction?
Things that qualify for Section 179 are tangible, so furniture, equipment, and computer software are included, but not land or buildings. It cannot be leased. It doesn’t need to be purchased new, it can be used. It needs to be used more than 50% of the time for business purposes to qualify. If you use something for personal use and occasionally use it for your business, it is not eligible.
Something that is eligible for deduction (with limitations) that you may not automatically think of is vehicles. At one time, a loophole was found, and all vehicles could have a full deduction, but that has since changed to only certain types. If you purchase a passenger vehicle, truck, or van, you are eligible for a partial deduction ($11,160 for cars, $11,560 for trucks and vans). If you purchase construction equipment, cargo vans, etc., they are eligible for a full deduction.
What happens now?
You bought and have it, and now you need to start using the equipment to be able to deduct it. For example, if you purchased something in 2021, but didn’t start using your purchase till 2022, then you won’t be able to claim it until 2022 taxes are being filed.
You will then need to claim the deduction on Form 4562 with information like description, cost, and amount being claimed.
There are more credits and deductions that can help your business so always check with your tax advisor or accountant for more information!