Apply Now

Blue header

Ascentium Capital Blog

Informative topics to help small businesses thrive

Maximize 2023 Deductions with Section 179: Tips for Small to Medium-Sized Businesses

photo of calculator on top of forms to complete 2023 taxes

For small to medium-sized businesses (SMBs), every penny counts. One valuable tool at your disposal is Section 179 of the Internal Revenue Code. This tax provision allows businesses to deduct the cost of qualifying equipment and property in the year they are purchased, rather than depreciating the expense over several years. Maximizing your Section 179 deduction can significantly reduce your tax liability and free up capital for your business. In this article, we'll provide you with some tips on how to make the most of Section 179 deductions, and we'll also discuss why consulting with experts such as tax professionals and accountants can help you explore your best options.

1. Understand Section 179 Eligibility:

The first step is to understand what qualifies for Section 179 deductions. Eligible assets typically include tangible personal property like machinery, vehicles, computers, and office furniture. However, not all assets qualify, and the rules can change from year to year. It's essential to stay updated on the latest IRS guidelines or consult with a tax professional to ensure your purchases are eligible.

male coffee shop owner working with tax advisor in his business

2. Keep an Eye on Annual Limits:

Section 179 comes with annual deduction limits. For the tax year 2023, the deduction limit is $1.16 million, with a phase-out threshold at $2.89 million. These limits can change, so it's crucial to check the current limits for the tax year in which you plan to make qualifying purchases. You can maximize your deductions by staying within these limits and strategically timing your purchases.

3. Invest in Depreciable Assets:

While Section 179 is beneficial for deducting the cost of equipment and property, consider the depreciation aspect as well. For assets that exceed the Section 179 limits or are not eligible, you can still benefit from regular depreciation deductions. Consulting with a tax expert can help you strike the right balance between Section 179 deductions and depreciation.

4. Plan Your Purchases Strategically:

To make the most of Section 179, plan your purchases strategically. Consider your business's needs, cash flow, and the timing of deductions. Purchasing necessary equipment at the right time can help you optimize your tax savings while ensuring your business operates efficiently. Utilize a Section 179 Deduction Calculator to get an idea of how much you may be able to save.

5. Consult with a Tax Professional:

Navigating the complexities of tax law, especially regarding Section 179, can be challenging for small to medium-sized business owners. To maximize your deductions and minimize the risk of making costly mistakes, consult with a tax professional who specializes in small business taxation. They can help you make informed decisions and ensure compliance with IRS regulations.

6. Explore Financing Options:

female business owner reviewing financing options

Sometimes, your business may need essential equipment or assets, but you may not have the cash on hand for large purchases. This is where financing options like those offered by Ascentium Capital come into play. Ascentium Capital provides tailored financing solutions designed to help businesses acquire the equipment they need while still taking advantage of Section 179 deductions.

7. Leverage Bonus Depreciation:

In addition to Section 179, consider taking advantage of bonus depreciation, which allows you to deduct a significant portion (80% for 2023) of the cost of eligible assets in the year they are placed in service. Bonus depreciation can complement your Section 179 deduction, providing even more substantial tax benefits for your business.

8. Keep Detailed Records:

Proper record-keeping is critical when claiming Section 179 deductions. Maintain detailed records of all equipment and property purchases, including invoices, receipts, and proof of payment. Accurate documentation will help support your deductions in case of an IRS audit.

9. Don't Wait Until the Last Minute:

Lastly, don't wait until the last minute to make qualifying purchases and claim your Section 179 deductions. Planning ahead and making informed decisions throughout the year will ensure that you can take full advantage of this tax provision without feeling rushed or making hasty choices.

photo of hourglass in front of calendar

Section 179 can be a valuable tool for small to medium-sized businesses to maximize deductions and reduce their tax liability. However, it's essential to understand the rules, stay within annual limits, and plan strategically. Consulting with tax professionals and exploring financing options, such as those offered by Ascentium Capital, can help you make the most of Section 179 while ensuring your business has the equipment and technology it needs to thrive.


Pair Financing with Tax Benefits

Don't miss out on this opportunity to optimize your tax savings and invest in the future of your business. Ascentium Capital offers flexible financing solutions that can help you optimize cash flow and tax benefits from Section 179.

Contact us today to learn more!

Not intended as tax advice. Please speak with your company's tax advisor regarding your business and its unique tax situation. The mention of or links to third-party information, services, products, or providers does not imply endorsement or support by Ascentium Capital. Individual research should be done before use of any product, process or service mentioned.
blue background

Ascentium has provided businesses with over $12 billion – capture your opportunities with flexible financing today!

Stay Connected with Ascentium Captial