Small Business Expensing (Section 179) refers to a provision in the U.S. tax code that allows businesses to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year from their gross income.
This incentivizes small businesses to invest in their operations by reducing the tax burden in the year of purchase rather than depreciating the cost over several years.
For tax year 2023, the maximum deduction is $1,160,000, with the phase-out threshold starting at $2,890,000. Qualifying assets include machinery, equipment, and certain types of improvements to nonresidential real property.
For example, if a small business buys a new delivery truck for $50,000, it can potentially deduct the full amount in the year the truck is placed in service, thus lowering its taxable income and overall tax liability.
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