How Section 179 Can Lower the Real Cost of Financed Equipment
By Brent Christiansen · Published
One of the most overlooked advantages of financing equipment is the tax treatment. Section 179 can let you deduct a large share of the cost the same year you put the equipment to work, even if you've only made a few payments. Here's how it generally works.
What Section 179 does
Section 179 of the tax code lets qualifying businesses deduct the cost of eligible equipment in the year it's placed in service, rather than depreciating it slowly over many years. For a lot of small businesses, that means a meaningful reduction in taxable income.
Why financing makes it powerful
Here's the part owners love: in many cases you can finance the equipment, make a handful of payments, and still deduct the eligible cost for that year. You spread the actual cash outlay across the term while taking the deduction up front, a strong cash-flow combination.
Timing matters
The equipment generally has to be purchased and placed in service by year-end to count for that tax year. As December approaches, financing can be the difference between claiming the deduction this year or waiting twelve months for the next one.
Talk to your tax advisor
Limits, eligibility, and how this applies to your business change with the tax year and your situation, so confirm the specifics with your accountant. Want to line up the financing side? Start with a quick credit-based pre-qualification.
Financing covered in this article
Common questions
Can you use Section 179 on equipment you financed?
Generally yes. Equipment you own and place in service can qualify for the deduction on the full purchase price even though you are paying for it over time, which is why many year-end purchases are financed rather than paid in cash.
When does equipment have to be in service to qualify?
By December 31 of the tax year you are claiming. It has to be in your possession and ready for use. Ordering or signing before year end is not sufficient on its own.
Is this tax advice?
No. Section 179 has annual limits, phase-out thresholds, and business-use rules, and how much it helps depends on your income for the year. Talk to your accountant; we will provide the financing details they need.
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