Deducting Equipment Costs in 2022: Section 179 & Bonus Depreciation

What is Section 179?

Simply put, Section 179 allows your business to write off the entire purchase price of qualifying equipment for the current tax year. The Tax Cuts and Jobs Act of 2017 (TCJA) changed aspects of both Section 179 and Bonus Depreciation and are still in effect for 2022. When used in conjunction, these deductions may allow your business to deduct up to 100% of capital purchases from your gross income.

What is Bonus Depreciation

Bonus Depreciation allows business taxpayers to deduct additional depreciation for the cost of qualifying business property. Prior to the 2017 TCJA revisions, the IRS limited Bonus Depreciation to only new equipment purchases. The law now allows for depreciation on used (first-use for purchaser) equipment.

Who do these deductions apply to?

Although all businesses benefit from Section 179 or Bonus Depreciation, the original goal of these revisions was to provide additional tax relief to small businesses.

Why do Section 179 & Bonus Depreciation matter to your company? 

The 2022 Bonus Depreciation Limit = 100%
Bonus Depreciation is typically deducted after the Section 179 limit is reached and is available for both new and used qualifying equipment.

The 2022 Deduction Limit = $1,080,000
This deduction applies to new or used equipment, and some software. For a 2022 tax year deduction, the equipment must be financed (or purchased) and put into service sometime between January 1st, 2022, and the end of the day on December 31st, 2022.

Do you have any upcoming projects which you think may fall under the TCJA Section 179 tax deduction or Bonus Depreciation umbrella? Contact us today with your questions and to tell us more about your project!

David J. Clamage
Managing Director, Saulsbury Hill Financial

These data are solely the opinion of Saulsbury Hill Financial, LLC and do not reflect the opinions, guidance or recommendations of any other entity or person(s).

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