When acquiring new equipment for your business—such as a computer, a delivery van, a manufacturing machine, or even a piece of furniture—those items are treated as capital assets. The IRS allows you to recover the cost of these assets over time through depreciation, but under certain conditions you can write off the entire purchase price in the first year. This offers a substantial tax deduction and boosts cash flow. The procedure consists of a handful of important rules, forms, and best‑practice steps. Below is a straightforward guide to help you claim full write‑offs on business equipment.
Understand the two main depreciation tools that enable a full first‑year write‑off: Section 179 and Bonus Depreciation. • Section 179 permits you to expense the entire cost of qualifying equipment, up to a dollar threshold that is adjusted yearly for inflation. The threshold is higher for small businesses and declines if your total purchases exceed a certain limit in a calendar year. • Bonus Depreciation covers assets eligible for the 100 % first‑year deduction and applies to all remaining depreciable property after the Section 179 election. Its rate has varied over the last decade, but as of 2024 it is again 100 % for new and used property acquired after 2022. Both methods are only available for property that is placed in service during the tax year and that is not part of a lease or a rental agreement.
Ensure the equipment qualifies. • The asset must be tangible personal property with a useful life of 20 years or less. • Items like land, real estate, and some furniture types do not qualify for the full write‑off. • If you are using the equipment in a trade or business, it must be used at least 50 % for business purposes to be fully deductible. • For used equipment, you must be the original owner or possess a title free from lease restrictions.
Collect your documentation before buying. • Store the invoice, receipt, or contract that records the purchase price, acquisition date, and equipment category. • Record the serial number, model, and any relevant identifying details. • If you pay in installments, preserve a payment schedule and the dates of each installment. • For leased equipment, you need the lease agreement and evidence that you have the right to claim the deduction under the lease terms.
Calculate the total amount you can expense. • Add up the cost of all equipment you plan to claim in the current year. • If the total exceeds the Section 179 threshold, you can still claim the maximum amount allowed by Section 179 and then use Bonus Depreciation for the rest. • If you exceed the overall Section 179 cap (the "phase‑out" threshold), the excess amount is not deductible under Section 179 and must be depreciated over its useful life.
Complete the election on your tax return. • For most small‑to‑mid‑size businesses filing a Form 1120 or 1120‑S, the election is made on Form 4562, Depreciation and Amortization. • The form asks you to list each item, its business use percentage, cost, and the amount claimed under Section 179. • If you choose Bonus Depreciation, list the remaining cost and check the appropriate box on Form 4562. • Attach a copy of the purchase invoice (or a summary if you have many items) to substantiate your deduction.
Use the half‑year convention. • The IRS assumes that any qualifying property placed in service during a tax year is placed in service halfway through that year. • This convention effectively halves the depreciation you can claim in the first year for assets that do not qualify for a full write‑off. • However, if you use Section 179 or 中小企業経営強化税制 商品 Bonus Depreciation, the half‑year convention is irrelevant because you are expensing the entire cost in the first year.
Maintain records for at least seven years. • The IRS may audit your return and ask for proof of the equipment’s purchase and business use. • A thorough file that contains the invoice, a business use log, and the original cost basis will shield you from penalties.
Be mindful of special situations. • Home office equipment: If part of your equipment is used in a home office, you may need to split the deduction between business and personal use. • Section 179 on leased equipment: If you lease equipment, the lease must be structured so you effectively own the asset (e.g., a lease‑to‑own arrangement). • International vendors: If you buy equipment from a foreign supplier, you must account for import duties and ensure the purchase price is reported correctly.
Sample scenario. • Your company purchases a new delivery van for $45,000 and a computer system for $3,000 in March. • The total purchase amount is $48,000, which is below the 2024 Section 179 limit of $1,160,000. • You elect to expense the entire $48,000 under Section 179 on Form 4562. • Because the entire amount is expensed, you do not need to claim Bonus Depreciation. • You keep the invoice and a log showing the van is used 100 % for deliveries, thereby validating the deduction.
Final checklist prior to filing. • Verify that each item truly qualifies for the full write‑off. • Ensure the business use percentage is at least 50 %. • Double‑check that the total Section 179 amount does not exceed the threshold or the phase‑out limit. • Attach all supporting documents. • File Form 4562 with your corporate return and retain copies for your records.

By adhering to these steps, you can boost your tax savings and preserve healthy cash flow. Stay organized, keep meticulous records, and consult a tax professional if you encounter complex ownership or leasing arrangements. The full write‑off is a powerful tool—when used correctly, it can transform a large equipment purchase into a substantial tax deduction.