Small Businesses Get a Permanent Tax Break on Buying Equipment

Tucked inside the mammoth tax and spending bill passed by Congress this month is a much-anticipated provision that will lock in a large tax break for small-business capital investments that has been temporary until now.

The break is intended to make it more affordable for small companies to buy up to $500,000 a year worth of equipment like computers, machinery and vehicles.

Known as the Section 179 deduction, the tax provision allows qualifying capital items to be written off immediately on a business’s taxes, instead of being depreciated over a number of years. That has the effect of lowering a business’s taxable profits, sometimes significantly.

The deduction is essentially limited to small and midsize companies. It begins phasing out when a company spends more than $2 million a year on qualifying purchases, and is eliminated entirely for those that spend more than $2.5 million.