Those of you who are familiar with claiming equipment deductions on your taxes undoubtedly remember when the Protecting Americans from Tax Hikes (PATH) Act was signed into law by Congress in December 2015. This act, meant to be an incentive for businesses to invest in equipment as a way to stimulate the economy, was updated on January 2, 2018. There are three key changes:
Changes to Section 179
- Depreciation limit is now $1 million
- The bonus depreciation is now 100 percent
- Equipment purchase limits have been increased to $2.5 million
Additionally, as part of the update, businesses are now able to backdate for the 2017 tax season to September 27, 2017.
The original PATH Act Tax Laws set depreciation at $500,000. With the updates, this number has doubled to $1 million for 2018 and beyond.
Bonus depreciation, which was set at 50 percent and meant to taper to 40 percent for the 2018 tax season and 30 percent for the 2019 tax season before completely phasing out has now been increased to 100 percent and extended until 2022. Beyond this, the bonus depreciation now applies to used equipment for the duration.
Equipment Purchase Limits
Finally, equipment purchase limits which were capped at $2 million are now increased to $2.5 million.
You can review the Section 179 Updates and the previous PATH Act Tax Laws here.
What this Means for You
If your business purchases equipment and machinery that's tax deductible under the PATH Act, it's important for you to know the parameters of the law and adapt your purchasing strategy to the best benefit of your company.
Whether you're planning to purchase computers, office furniture, equipment (including skid steer attachments), and/or machinery to be used solely for your business, these updates to Section 179 will likely affect your taxes this year and in the coming years.