Section 179 for New and Used Heavy Equipment

What Is Section 179?

IRS Section 179 allows construction businesses to deduct the full cost of qualifying equipment and software in the year it’s purchased and put into service. This tax benefit simplifies the process of writing off equipment expenses, helping construction companies invest in the machinery they need while improving their financial position. Whether you’re purchasing or financing new equipment, Section 179 can be a significant advantage to streamline your operations and reduce tax liability.

Spending Limits of Section 179 for 2024

Section 179 comes with specific limits. For 2024, businesses can deduct up to $1,220,000 in equipment purchases. However, this benefit starts to phase out once total equipment purchases exceed $3,050,000, with the deduction reducing dollar-for-dollar. Once purchases reach $4,270,000, the deduction is fully phased out. These limits make Section 179 especially beneficial for small to medium-sized construction businesses looking to invest in new equipment and manage tax liabilities effectively.

How Section 179 Works for Construction Equipment Purchases

Section 179 allows construction businesses to write off the full purchase price of qualifying equipment in the current tax year. This incentive encourages businesses to invest in equipment immediately, rather than delaying purchases. For small businesses, this can significantly reduce the tax burden by allowing up to $1,220,000 of equipment costs to be deducted on the 2024 tax return. It’s a valuable tool for upgrading your fleet and improving operations while benefiting from substantial tax savings.

How to Claim Section 179 for Construction Equipment

Claiming Section 179 is straightforward. Businesses simply need to list their qualifying equipment purchases on IRS Form 4562 and submit it with their tax return. However, it’s crucial to consult a tax professional to ensure all details are accurate, as tax regulations can be complex and easy to misinterpret. A professional can help you maximize your deduction and ensure compliance with current tax laws.

Section 179 Example for Construction Equipment

Let’s consider the tax savings on a $100,000 construction equipment purchase under the 2024 Section 179 deduction. Assuming a 21% tax bracket, here’s how the tax savings break down:

Equipment Purchase Price: $100,000

Section 179 Deduction Applied: $100,000

Tax Savings (21% tax bracket): $21,000

Equipment Cost After Savings: $79,000

After applying the Section 179 deduction, you could save $21,000 in taxes, significantly reducing the net cost of the equipment. If you financed the $100,000 machine for around $2,083 per month, you would still be able to deduct the full purchase price, provided the equipment is put into service during the tax year.

While this example demonstrates the potential cash flow benefits, it’s important to remember that each business’s tax situation is unique. Always consult with a tax professional to ensure you’re making the best financial decisions for your company when utilizing Section 179.