With the passage of the Protecting Americans from Tax Hikes (PATH) Act of 2015, most equipment, technology, and off-the-shelf software, up to $500,000, acquired and put in service in or since January 1, 2015, can likely be deducted. Any excess above the allowable deduction can be depreciated over five to seven years, depending on the type of equipment. Additional amounts may be expensed as per applicable depreciation schedules.
IRS Section 179 encourages business owners to invest in equipment or technology by allowing them to deduct a substantial amount of the asset’s value the first year. Taxpayers who acquire new equipment — including machinery, furniture, fixtures and off-the-shelf software — may be able to deduct up to $500,000, as well as 50% bonus depreciation of qualifying expenses during the first year of ownership. Standard first-year MACRS (Modified Accelerated Cost Recovery System) deduction applies to the remaining amount up to $200,000.