Save Money On Taxes Before the Year Ends

Like most small businesses, you probably have some end-of-year purchases you would like to make for your business. So you can deduct the expenses from 2021 under Section 179. Unfortunately, it is not that simple. Section 179 does not cover the following:

1. Equipment that has been depreciated (meaning you’ve subtracted the depreciation expense from your income)
2. Equipment that is NOT in use before January 1, 2022
3. Equipment that you cannot receive this year (Covid & Supply Chain issues)

What it does cover is labor. If you buy a piece of equipment that requires installation, the LABOR is deductible under Section 179. if you pay for the labor before December 31st, 2021. This matters because many projects have a heavy labor component—whether or not there is capital equipment to purchase.

For hourly work, the two most common payment methods are:

1. Pay for a fixed quote before January 1, 2022, even if the installation comes later.
2. Purchase a block of hours. This is a good option for projects that are hourly and do not have a fixed labor amount.

DO NOT ask for a credit in dollars for future labor—the hours and dollars are very difficult to reconcile later.

There are a lot of other things that Section 179 does not cover, but these are the most common. Be sure you know what is and isn’t eligible before making purchases!