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TAX CODE 179 Made Simple
02 November 2021

TAX CODE 179 Made Simple

Businesses want to REDUCE  INCOME  TAXES

  • To reduce taxes businesses either reduce revenues or increase expenses
  • It is unlikely that businesses want to reduce revenues… So increasing expenses is the logical option
  • BUT, how does a business increase expenses but not use any of their cash? 
  • Depreciation is how….Tax Code 179 is just using depreciation more effectively
  • Tax Code 179 allows a business to fully depreciate (i.e. expense) the cost of the equipment/software in the year they purchase it
  • Depreciation is the expense a business takes for purchasing and using equipment/software
  • Depreciation is one of those rare expenses that DOES NOT require a business to use money from their bank account
  • Normal expenses like payroll, insurance and rent are paid with actual cash out of the business’ bank account


Tax Code 179 REDUCES the effective COST of the Equipment/Software (an example)

  • Equipment/Software Quote =             $25,000
  • Practice’s Estimated Tax Rate=             21%          
  • $25,000 * 21% = $5,250 in 2021 income tax savings
  • Therefore, a $25,000 piece of equipment less the tax savings of $5,250 equals net project cost of $19,750.  You have just shown the practice how to save $$.


Owners can EARN MORE CASH in 2021

  • Your customer purchases from you in 2021
  • Your customer finances the equipment/software through GSG
  • GSG requires NO $$ down and defers the start of the business’ payments until 2022
  • Taking the Tax Code 179 Tax Deduction Now with No Money out of pocket for the purchase of the equipment/software in 2021 means….
  • Owners can take the extra $5,250 in cash (tax savings from example above) out of the business in form of extra bonuses or pay.  They make more MONEY.

Use It or Lose It

  • Tax Code 179 is available to businesses every year, however, it does not rollover
  • 2021 Tax Code 179 Limit:  $1,000,000
  • 2022 Tax Code 179 Limit:  $1,000,000





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