Filing your taxes as a business owner can be confusing, to say the least. You might be wondering, "can I write off furniture on my taxes?" Enlisting the help of a qualified tax professional is paramount so that you can take full advantage of tax laws that benefit you and your business, such as section 179 of the IRS tax code that allows you to write off your office furniture when you prepare your taxes. Keep reading for more details of office tax deductions and what tax benefit may be available for you.
What is the Section 179 Deduction?
Section 179 is a section of Internal Revenue Code (IRS) tax code, which allows businesses to deduct the price of office-related materials during the tax year. This immediate business expense deduction makes it so much easier for businesses to make payments and purchase equipment.
It’s an incentivized deduction policy that’s designed to promote and support businesses as they invest in themselves. In layman's terms, if you buy any qualifying equipment, using section 179, you can deduct the full purchase price from your gross income for the whole tax year.
Previously this portion of the tax code was often called the “SUV Tax Loophole,” or the “Hummer Deduction,” because of the use of this section to write off the purchase of qualifying vehicles.
However, this practice of misusing the tax deduction laws has been limited now, because of new parameters in place.
Even so, many businesses––especially small businesses––can obtain a lot of benefits from section 179. This was really the main goal behind the creation of this piece of legislation. It’s also been included in the Stimulus Acts and Tax Bills in recent years.
As to qualifying expenses you can use to utilize this write off, those can include vehicle purchases, equipment and machinery purchases, software purchases, office furniture purchases, and more.
How This Write-Off Works
Before the creation of section 179 for tax deductions, any and all businesses shared a common practice of tax deductions; depreciation with time.
For example, if a company spent $10,000 on a new machine, they could potentially write it off year by year, with $1000 written off every year for five years. This practice allowed them to stay inside their tax bracket and not have to pay additional taxes.
However, with Section 179, there is no need to go through this roundabout way of writing off your deductions. You can simply write off the entire purchase completely, within the tax year of the purchase.
Of course, every business obviously prefers this more straight-forward approach––hence the high use of this tax deduction and subsequent legislation to limit its abuses.
However, keep in mind that the maximum tax write-off for purchase of qualifying equipment in one year is $1,050,000 for small businesses. Depending on the size of your business, this is a significant enough amount that can easily cover all qualifying furniture and business-related equipment.
Limits to Section 179
Like every other law and piece of legislation, Section 179 comes with some guidelines and limitations. As mentioned, the highest amount of tax that can be written off is $1,050,000.
However, the total cost of the equipment (cost, not tax) which can be purchased during a financial year is around $2,600,000 at present. So if your costs were higher than this amount, you’d be able to deduct dollar-for-dollar. However, if your total price tag is $3,650,000, your tax deduction luxury is lost.
These limits are put in place to make sure that small and medium-sized businesses are able to make the most it. Large businesses have less of a need for these breaks, but for a small business, it could be a matter of life and death for their business.
From office renovation expenses to rental property tax deductions to office furniture, writing off office expenses can get confusing. Be sure to check with a tax professional when in doubt
Keep in mind that section 179 is limited to the purchase of equipment, cars, machinery, and computers. For a full list of what you can write off and any deductible expense, see the IRS website.
Who Qualifies for Section 179?
From the above information, you can make an educated guess on how to run your small business. Any business with a purchase cost of less than 3,670,000 will automatically qualify to receive their tax deduction benefits. Confide in Juniper Office furniture solutions to find the furniture for your new office design.
Section 179 allows people and businesses to buy their desired or required business equipment and write them off as tax deductions in a short time frame. When tax season rolls around again, ask your tax professional to include business expenses and/or office expenses in your tax preparation.
This ease of use for this particular tax code is prompting more businesses to purchase wanted or needed equipment and home office furniture that’s been languishing on their wishlists. Why not your business too?