How to Maximize Your Small Business's Savings with the Section 179 Tax Deduction for Office Supplies
If you’re like most small business owners, you’re always looking for ways to save money. One way to do that is to take advantage of the Section 179 tax deduction for office supplies.
What is the IRS Section 179 Tax Deduction for Office Supplies and How Can It Help Small Businesses?
Sometimes called the “first-year deduction,” Section 179 of the IRS tax code allows businesses to write off the full cost the same year the equipment is purchased or leased in — without capitalizing and calculating depreciation over the years to come.
This immediate deduction method lowers businesses’ current-year tax liability and can provide tax relief for small businesses.
What is the Difference Between Section 179 Deduction and Bonus Depreciation?
Section 179 can give you greater flexibility but is capped at an annual limit of $1,080,000 and reduced by the dollar amount of purchases. It is also limited to taxable income.
Bonus depreciation has no annual limit and is not limited to taxable income. It can be used to create a net loss.
What Office Supplies and Business Equipment Purchases Qualify for Section 179 Tax Deductions?
In order to qualify for the Section 179 deduction, the equipment must be used for business purposes and purchased between January 1 and December 31 of the current tax year.
Both new and used equipment can qualify for the deduction, as well as equipment you own or lease.
Examples of qualifying equipment may include:
Eligible Office Equipment and Software
- – Computers
- – Copiers
- – Printers
- – Ink and toner
- – Printer and copier paper
- – Fax machines
- – Smartphones and tablets
- – Software purchased for business use
- – Office furniture and appliances (i.e., microwave, coffee machine, refrigerator)
Eligible Section 179 Property
- – Tangible personal property used for work
- – Property attached to your business but is not part of the building’s structure (i.e., large manufacturing tools and equipment)
- – Partial business use (equipment used for both personal and professional purposes; you will have to calculate a percentage based on the time you use the equipment for business purposes vs personal use)
- – Improvements to existing non-residential buildings (i.e., updated fire alarms, HVAC, roofing)
The above list of qualifying equipment is subject to change and could vary due to state tax laws. Consult your tax advisor to determine whether or not your equipment is eligible for the deduction.
What Office Supplies are Ineligible for Section 179?
You can claim the Section 179 deduction for many types of equipment, but there are some limitations. The following items cannot be written off as Section 179 deductions:
- – “Real property:” Land, buildings, permanent structures, and components of permanent structures, such as fences and paved parking areas
- – Property outside of the United States
- – Property used to furnish lodging
- – Property acquired as a gift or inheritance
- – Property purchased from related parties (you cannot sell equipment to yourself and claim it)
- – Property that is not considered personal property (you cannot claim property you do not own)
- – Highly customized software
- – Databases (unless they are considered public domain)
- – Business websites
How Much Can I Claim for Office Supplies and Goods?
The maximum deduction limit for Section 179 is $1,080,000 in 2022. The deduction limit is determined by the total cost of all eligible equipment purchased during the tax year. You may also be able to deduct any sales or use taxes associated with the purchase.
How Can I Calculate Section 179?
You can use an online Section 179 calculator to help you calculate your deduction and tax savings. The calculator will allow you to enter the cost of eligible equipment and then provide you with the amount that can be deducted based on the total purchase price.
Some states have different 179 tax rules, so it is important to contact a certified public accountant or tax preparation professional.
What is the Deadline for Section 179 in 2022?
The deadline to purchase qualifying equipment and claim 179 deductions is December 31, 2022. Purchases made after this date will not qualify for the 179 tax deduction this year. The final date for submitting the Section 179 deduction for 2022 is April 18, 2023.
It’s important to keep in mind that 179 tax deductions are subject to change, even within the same year. It’s always best to contact a financial or tax professional to ensure you are following the most recent tax rules and regulations.
Take Advantage of Section 179 Tax Deductions with Our Office Equipment Financing Options
Your small business can benefit from Section 179 by purchasing or leasing new equipment you need from Mid Ohio Strategic Technologies. Our printers and copiers can be written off as business expenses under Section 179.
If you are already in a lease agreement with another company, we may be able to buy your agreement out and give you a better deal.