Small Business Finance News

Section 179 Tax Deductions Still In Limbo

Written by Tim Morral
Published: 12/15/2015

While a do-nothing-helpful Congress fiddles away the month of December, an important tax deduction for businesses that was supposed to be increased remains at $25,000 instead of $500,000.

The Section 179 deduction was created to encourage businesses to buy equipment and invest in productive assets that help drive overall economic growth.

Do Nothing Congress and Section 179 Delays

Unfortunately, an expected increase in this tax deduction has been delayed as Congress haggles over a $1.1 trillion spending bill that was likely to put the Section 179 increase into effect.

How much are we talking about here? Well, the current deduction amount is $25,000 and the new one is $500,000, so that's a huge $475,000 difference.

Section 179 Delays in Congress Are Slowing Economic Growth

No surprise that our do-nothing Congress isn't getting the job done on this one, but it comes at a big price to the economy.

December is the time of year when businesses are executing on their end-of-year tax optimization strategies, actively spending in order to lower their taxable profits.

If you need equipment, for example, every dollar you spend on new assets up to the Section 179 limit is tax deductible. In other words, you keep thirty cents or so in your pocket as a result of your tax savings.

The problem is that if you buy equipment and it exceeds your Section 179 limit, then you can't deduct it in the current calendar year. Instead, you have to write off the depreciation of the equipment over several years.

Because Congress hasn't fixed the Section 179 tax deduction issue in time, countless dollars are not being spent that would otherwise have been spent.

As a result, we'll soon be hearing news stories about how the economy is slowing down and how companies are not investing for the future because they are worried about China yada yada.

No, not true. Companies are not investing because Congress can't get its act together and get the Section 179 deduction limit back to $500,000, a level it's been at for many years in the past.

If you are among the many company owners who can't get figure out year-end spending because they don't know what the Section 179 limit will be at the end of the month, there's only a small silver lining to your dilemmas: at least you are not as dysfunctional as the U.S. Congress is.

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