Section 179 Sees Record High Tax Deduction for Capital Equipment in 2023

After navigating years of fluctuating deduction limits, shifting value rates, and unexpected retroactive measures, we're excited to share some great news: 2023 has brought a welcome trend continuation for the Section 179 tax deduction on capital equipment. 

In this blog, we'll cover the details of this record-breaking year, helping you understand what to expect and how to maximize your savings through Section 179.

Section 179 in 2023

Over the past few years, Section 179 has been a subject of constant change in the world of tax deductions. Deduction limits seemed to dance up and down, often accompanied by shifting value rates and the specter of retroactive measures that would alter the tax landscape for the following calendar year.

However, in 2023, there's a glimmer of hope and a hint of stability in the Section 179 arena. For the fourth consecutive year, the deduction limit has seen an increase, promising a more predictable environment for individuals planning a capital equipment purchase.

Here's the situation this year: 

The deduction limit has risen slightly from $1,080,000 in 2020 to $1,160,000.

Note: You must purchase and have your equipment in service by EOD December 31, 2023, to qualify for a full deduction.

The spending cap is the most we've seen yet from $2,700,000 in 2020 to $2,890,000. Once you hit the spending cap, your deduction will begin to decrease dollar-for-dollar. 

For example: equipment costing $2,900,000 is 10k over the threshold and would only be allowed to deduct $1,160,000, with another dollar coming off the deduction for every additional dollar spent. This would leave you with a final deduction of $1,150,000. 

The Bonus Depreciation rate has dropped from 100% to 80%.  Some years there's no bonus depreciation at all, so a 20% drop from 2022 can still be looked upon favorably by businesses that will be purchasing above the spending cap in 2023.

Why Should I Use Section 179 in 2023?

In the final stretch of 2023, you might be wondering what the rush is all about when it comes to capital equipment purchases.

To put it simply, the deduction has reached its highest point ever, and if you are looking for equipment on the secondary market, the limits easily fit within the pricing of most items you might consider.

While Section 179 probably isn't going away in 2024, there's no guarantee what it will look like. 

How to Calculate Your Savings

So, how can you calculate the savings that Section 179 can bring your way in 2023? 

Section 179 features a calculator tool for figuring out how much you can save on an equipment purchase in 2023 when you take advantage of the deduction. If you're considering a major purchase in the near future, we suggest you check it out. 

Below is an example screenshot of an equipment purchase of $750,000. Click on the image if you'd like to visit the calculator and see your own results.

The Takeaway

In the world of tax deductions for capital equipment, 2023 is a standout year.

If you're a small or mid-sized business seeking equipment, Section 179 is in place to help you save thousands (or hundreds of thousands) of dollars on your purchase.

And don't forget, Block Imaging is ready to help with equipment, project management, installation, and ongoing service. Call 517-688-8800 or submit a contact us form here.