Section 179 Deductions

Section 179 allows you to deduct certain types of property as an expense instead of depreciating it, if it’s purchased for use in your business. These deductions are capped at $1 million in a year. Additionally, your 179 deductions can not exceed your income for that year. However, if this limits you, you can roll the deductions to the next year. For example, if you finished your taxes and your income was $100k, and you had an additional $125k of Section 179 deductions, you could roll the extra $25k of deductions into the following year. 

Note that if you buy a $1,000 computer and you use it 60% of the time for work and 40% for personal use, you’re only supposed to deduct 60% x $1,000 for your business’s 179 deduction. Additionally, the purchase needs to be used for work purposes in the year it was bought. You can’t buy a laptop in 2018 for personal use, then start a business in 2019 and deduct the cost of the laptop then.

The asset must be used the majority of the time for business (i.e. you can’t buy a new laptop that you use 25% of the time for work, and deduct that 25%; its primary purpose must be for work). If you’re using the asset for work less than 50% of the time, you can still depreciate it however. For example, the 25% could be depreciated over the computer’s 5 year useful life (so 25% x $1,000 cost = $250 of depreciation, or $50 a year over 5 years).