What Property Qualifies for the Section 179 Deduction?

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October 21, 2015

The Section 179 Deduction is an excellent way to encourage small business owners to invest in their companies by offering tax breaks on purchased equipment for the company. But like all government programs, there are certain speculations that you have to go through and rules you need to follow, in order to qualify.

tax savings

Here is a handy list of rules for property that you’re able to claim under the Section 179 Deduction:

  • Considered Eligible Property

All this means is that it needs to be a tangible object, such as a piece of machinery or livestock on a farm. This also includes software purchased for the company with the stipulation that the software was purchased “off-the-shelf,” which means the software is available to the public and is subject to nonexclusive license.

Eligible Property also includes real estate for leasing or development. Restaurants and retail stores also fall under this category but 50% of the building must be designated to conducting business.

  • Property Acquired for Business Use

This means that the property being claimed must be for company use. If it is used from both business and personal, then the percentage of business use is equal to the percentage of the property cost that you can claim.

  • Property Acquired by Purchase

All this means is that you need to have bought the property with money. However, property bought from relatives or individuals belonging to the same group relevant to the business does not qualify.

As long as your property follows these 3 guidelines, it can be claimed on your tax return under section 179.

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