In the new bill that was passed by Congress in December of 2015, there was an important change that can help small to mid-sized businesses for capital spending. This change, called the Section 179 deduction, allows businesses to deduct 100% of purchases made on qualifying equipment. Before the Section 179 deduction, businesses were allowed to write off bought or leased piece of equipment each year through depreciation. The change of being able to write off 100% of the purchased equipment in the first year will significantly make accounting and taxes much more manageable. Allowing businesses to write off 100% of qualifying equipment in the same year as purchase, will create an increase in the purchasing of equipment. This increase of spending money for capital and equipment will give companies that make computers, software, farm and industrial machinery, and trucks and cars could see gains in their sales. Companies that will be negatively effected by Section 179 deduction are leasing companies. Once a company spends more than $2 Million on equipment, the tax advantage will get cut. Section 179 deduction is going to help small to mid-size business owners significantly by opening up the opportunity for more capital spending and time from having to deal with accounting and tax headaches. A drawback of the tax advantage is an increase in capital spending and a decrease in hiring. With the opportunity to save significant tax dollars on equipment might persuade business owners to invest in capital then an actual workforce.
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