What is Section 179?
Section 179 allows businesses to deduct the full cost of capital assets (such as an industrial generator for backup power) immediately instead of depreciating the asset over its useful life. This means capital savings now, not later.
Eligibility Requirements for Section 179
- Tangible Assets: Industrial generators are tangible. Intangible assets like patents, trademarks, or copyrights do not apply.
- Purchased Assets: A leased asset does not qualify.
- Business Use: The asset must be used more than 50% of the time for business purposes.
- No Related Parties: The asset cannot be acquired from a related party or inherited.
By making an industrial generator purchase toward the end of the calendar year, Section 179 allows businesses to maximize their tax savings in the current tax year.
Hypothetical Example
A manufacturing business purchases a used Cummins 350 kW generator. Assuming a corporate tax rate of 35% and room within the Section 179 limits, the business could bring the real purchase price down significantly:
| Line Item | Amount |
|---|---|
| Purchase of used 350 kW generator | $54,000 |
| Corporate tax bracket | 35% |
| Section 179 deduction (up to $1M) | $54,000 |
| First year total deduction | $54,000 |
| Cash savings (at corporate tax rate) | $18,900 |
| Real equipment cost (after tax savings) | $35,100 |
This tax strategy enables businesses to reduce upfront costs and invest in critical equipment more affordably.
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Story Summary
What is Section 179?
Section 179 allows businesses to deduct the full purchase price of qualifying equipment and software immediately, rather than depreciating it over time.
What Types of Generators Qualify?
New, used, and surplus industrial generators qualify as long as they are:
- Used for business purposes more than 50% of the time
- Tangible property that is purchased, not leased
What is the Maximum Deduction for 2024?
The maximum deduction for 2024 is $1,220,000, with a phase-out beginning at $3,050,000 in total equipment purchases.
When Does Equipment Need to Be Placed in Service?
Equipment must be purchased and in service by December 31 of the tax year to qualify.
Can You Use Section 179 for Financed Purchases?
Yes, as long as you own the equipment, financed purchases qualify for the deduction.
How Do You Claim the Section 179 Deduction?
Fill out Part I of IRS Form 4562 and include it with your tax return. Consult a tax professional for guidance.
Contact Generator Source Today!
Learn more about Section 179 or ask questions about your industrial generator purchase. Call (877) 866-6895 or email Sales@GeneratorSource.com.