Well, now that America has seen “page 1” of GOP presidential nominee Donald Trump’s income tax return, we now know The Donald was telling the truth about learning the true meaning of his wealth, through his “financials” versus his income taxes. In the income tax world, he’s been broke for the last 20 years and unless we simplify the tax code, he’ll be broke for life!

Page one on his return shows his true side to lowering his income taxes: The buying, depreciation and selling of business property and equipment, or Section 179. It’s going to sound a little like “supply side” economics, so get ready for a legal bumpy ride.

What is the Section 179 deduction?

Most people think the Section 179 deduction is some mysterious or complicated tax code. It really isn’t.

Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the full purchase price from your gross income. It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in them.

Today, Section 179 is one of the few incentives included in any of the recent Stimulus Bills that actually helps small businesses. Although large businesses also benefit from Section 179 or Bonus Depreciation, the original target of this legislation was much needed tax relief for small businesses – and millions of small businesses are actually taking action and getting real benefits.

Essentially, Section 179 works like this:

When your business buys certain items of equipment, it typically gets to write them off a little at a time through depreciation. In other words, if your company spends $50,000 on a machine, it gets to write off , for instance, $10,000 a year for five years.

Now, while it’s true this is better than no write-off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it.

In fact, if a business could write off the entire amount, they might add more equipment this year instead of waiting over the next few years. That’s the whole purpose behind Section 179, to motivate the American economy (and your business) to move in a positive direction. For most small businesses, the entire cost can be written-off on the tax return (up to $500,000).

Who Qualifies for Section 179?

All businesses that purchase, finance, and/or lease less than $2,000,000 in new or used business equipment during any tax year should qualify for the Section 179 deduction.

Most tangible goods including “off-the-shelf” software and business-use vehicles (restrictions apply) qualify for the Section 179 deduction. To qualify for the Section 179 deduction, the equipment and/or software purchased or financed must be placed into service between January 1 and December 31, of the calendar year.

The deduction begins to phase out if more than $2,000,000 of equipment is purchased – in fact, the deduction decreases on a dollar for dollar scale after that, making Section 179 a deduction specifically for small and medium-sized businesses.

What’s the difference between Section 179 and Bonus Depreciation?

Bonus depreciation is offered some years, and some years it isn’t. Right now, it’s being offered at 50 percent.

The most important difference is both new and used equipment qualify for the Section 179 deduction (as long as the used equipment is “new to you”), while bonus depreciation covers new equipment only.

Bonus depreciation is useful to very large businesses spending more than the Section 179 spending cap (currently $2,000,000) on new capital equipment. Also, businesses with a net loss are still qualified to deduct some of the cost of new equipment and carry-forward the loss.

When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation – unless the business had no taxable profit, because the unprofitable business is allowed to carry the loss forward to future years.

Section 179’s “more than 50 percent business-use” requirement

The equipment, vehicle(s), and/or software must be used for business purposes more than 50 percent of the time to qualify for the Section 179 deduction. Simply multiply the cost of the equipment, vehicle(s), and/or software by the percentage of business-use to arrive at the monetary amount eligible for Section 179.

Now, in the consumer world, especially during Income tax season, aren’t you looking for that “magic man” accountant that will bring you a terrific refund? If you do, then don’t blame The Donald for not firing his tax man. He applied the business deductions- and credits available to him.

Actually, blame your elected official. After all, they created the law in the first place! And if you want to eliminate business deductions- again remember, as you take your consumer tax refund- to save and spend, businesses use their tax deductions and credits to – spend and invest in their businesses ( in theory) . Do we really get rid of them?

America, on Election Day, will help to determine that answer. In the meantime, I nominate his accountant for “H & R Block Tax Trainer ” supervisor, immediately!

Anthony Rivieccio is the founder & the CEO of The Financial Advisors Group, celebrating its 20thyearasafee-only financial planning firm specializing in solving financial problems. Anthony, a recognized financial expert since 1986, has been featured by many national and local media including: Klipingers Personal Finance, The New York Post, News12 The Bronx, Bloomberg News Radio, Bronxnet, Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Bronx News and The Bronx Chronicle.

For financial assistance or a FREE 2016 Investment Analysis. Anthony can be reached at (347) 575 5045.