2023 Tax Savings: Section 179 Deduction for Michigan Builders

As a Michigan builder, you can utilize the Section 179 tax deduction to invest in substantial equipment, machinery, and tools whenever needed. This deduction enables you to gain immediate access to new equipment, making it easier for small construction businesses to keep up with the latest technology while minimizing depreciation.

By taking advantage of Section 179, you can ensure that your construction business stays competitive and up-to-date with the latest tools and equipment.

What is Section 179, and how has it changed?

Internal Revenue Code Section 179 allows businesses to immediately deduct the total purchase price of qualifying equipment and/or software purchased during the tax year. When buying eligible equipment, you can deduct the entire purchase price on your business income tax return.

Under the previous tax law, the Section 179 deduction was capped at $500,000, with a phase-out beginning at $2 million. However, the new tax law, the Tax Cuts and Jobs Act (TCJA) has raised the deduction limit to $1 million and the phase-out threshold to $2.5 million, with adjustments for inflation each year.

Section 179 Deduction Limits 

Starting from the 2022 tax year, the maximum Section 179 expense deduction for qualifying equipment and software is $1,080,000. However, this limit is reduced if the cost of Section 179 property placed in service during the tax year exceeds $2,700,000. Additionally, if you plan to place sport utility vehicles in service during the 2022 tax year, the maximum Section 179 expense deduction for these vehicles is $27,000. Make sure to keep these figures in mind when planning your business expenses for the upcoming tax year to maximize your tax savings.