Sunday, January 19, 2014

How to literally pay next to no income tax, with a small business in the USA


            Dealing with the Internal Revenue Service or the IRS is never a fun time. Depending on the reasoning, audits and high tax penalties can make all of the tax codes confusing and intimidating. One particular tax code, however, was put in place by the Internal Revenue Service and may substantially assist small business owners in the United States. Section 179 has numerous advantages and disadvantages that help facilitate understanding into its business saving importance. These benefits will be explored as well as contrasted against their disadvantageous elements. In respect to businesses that purchase equipment for on-site usage, such as furniture or industrial spray booths, hundreds of thousands of dollars can be saved in income tax if Section 179 is used properly.

Benefits of Tax Code 179
           
            The IRS to assist small businesses and taxpayers created section 179 of the IRS tax code, which enables its recipients to reap larger income deductions when filing for taxes. In the past years, with the arrival of recent economic woes in the United States, the stimulus’ that have been pumped into the economy also affected this tax code. For 2012 and 2013, the dollar amounts for money spent on purchases that can be deducted from a taxpayer income were increased to $500,000 previously up from its initial $25,000 amount. Up to $2 million dollars can now be spent on equipment, which includes a 50% bonus depreciation deduction if more than two million is spent on equipment used for business purposes. Depreciation bonuses also apply to the depreciation level of new and old machines, which present further benefits from section 179. Businesses that do not have the capital to purchase expensive equipment can also take full tax deductions on lease and financed equipment. This means that even though payments must be made over the life term of a loan, the entire amount can be deducted for tax year 2013, up to the previously mentioned limit.


Disadvantages of Tax Code 179
            While most companies would enjoy using a vehicle as a write off for business deductions, strict rules in the tax code forbid against the use of private vehicles. Large vehicles averaging more than 6,000 pounds can only be deducted from business expenses. Numerous businesses tried to work around this rule by purchasing a Hummer or SUV and deducting it as a business expenses. The IRS has since caught on to this and made special regulations also prohibiting the use of these vehicles from businesses expenses deductions. In addition to luxury vehicles being prohibited, the purchase of land, office space and buildings are also forbidden from being used in business deductions. One of the most disadvantageous components of tax code 179 is that it is subject to change any year. The large income deducting benefits were only added as a result of the recent stimulus packages and therefore can be rescinded at any time.

Types of Qualifying Equipment and more benefits

            Business vehicles over 6,000 pounds, computer software and professional equipment such as office furniture are among some common deductions listed under code 179. Any companies that have equipment that is so large it must be contained in a separate unit or warehouse such as large printing press or industrial spray booths can include these assets in their deductions. Some equipment manufacturers have begun placing stickers confirming their appropriate for tax code 179 deductions to help sell more units.

There are many advantages and disadvantages to IRS tax code 179 which can help or hurt a businesses success. Some of its revenue enhancing benefits have been elevated as a result of the recent recession. Although its policies are subject to change at any time, many businesses are taking advantage of this phase and benefiting from larger cash flows and enhanced expense reductions to off set the cost of expensive equipment. Take advantage of this irs code by learning more about it today.


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