In part one of this four-part series, our Houston contractor attorneys educated you on a new tax act that allows you to buy construction equipment and take up to one million dollars in deductions. The best part about this new tax law is that the equipment can be new or preowned. In this section, we will focus on the type of “business equipment” you can purchase, lease, or finance under Section 179 deduction.
Business Equipment That Qualifies for Deduction
Here are some of the most common pieces of newly owned “business equipment” in the construction industry that are eligible for deductions under Section 179:
- Construction Equipment: Whether it’s bulldozers, front loaders, backhoes, or any similar type of equipment, new or used, this machinery is all qualified for deductions under the new tax act.
- Work Trucks: Any vehicle that weighs more than 6,000 pounds that is used for work purposes including trucks, tractor-trailers. and forklifts are appropriate for tax deductions.
- Tangible Personal Property: Although the definition of “tangible” personal property may vary by state, this includes any equipment that is perceptible by touch or any of the other senses. For example, preinstalled building materials, electricity, and furnishing accommodations may apply; however, it’s best to confirm your tangible property with a tax expert before filing a tax return.
- Computers and Office Equipment: Any computers, “off the shelf” software, and property attached to an office structure is applicable. This includes HVAC units and security systems.
For more information on qualified “business equipment”, we encourage you to visit the official Section 179 website.
Criteria for Qualification
There are several ways in which purchased equipment can qualify for this exciting new tax incentive. This includes the following:
- Newly Purchased: As we mentioned in part two, in order to qualify, you must purchase equipment that is newly owned by your company. Even if it’s used, it must be equipment you recently bought for your business.
- Actively Used: The equipment must be “placed into service” during the year you are filing a tax return for it. In other words, if you buy equipment in 2018, but do not use it until 2019, you must wait until 2019 to file a deduction.
- Sole Ownership: The equipment cannot be previously owned by your company or by another company associated with your business. It truly must be new to your business.
- Primarily for Business: This equipment must be “more than 50 percent business-use” to be eligible.
For more information on this new tax act, please read part four.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.