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Section 179 is a powerful tool for small-to-medium-sized B2B distributors. It allows you to invest substantially in critical software like ERP and ecommerce platforms while receiving immediate tax relief. With Section 179, you can deduct up to $1,220,000 in 2024, lowering your taxable income. This means you’ll have more money to invest in your business for future growth.
Not only will this tax deduction help reduce your tax bill, but by upgrading your software, you’ll also improve how your business runs, helping you serve your customers better and outperform your competition.
In this blog, learn about Section 179 and how to take advantage of it.
Section 179 allows businesses to deduct the full cost of software and other equipment they buy and start using during the year. For B2B distributors, you can use the deduction for ERP and ecommerce software—tools that help you run your business smoothly.
It’s important to note that the software must be "off-the-shelf" and used more than 50% of the time for business purposes. Custom-developed software typically doesn’t qualify.
If your software purchases exceed the Section 179 deduction limit of $1,220,000, you can still take advantage of bonus depreciation, which allows for an 80% deduction on the remaining cost of qualifying assets. Unlike Section 179, bonus depreciation has no phase-out, making it useful if your software investment is substantial.
One of the best things about Section 179 is that you can deduct the full cost of software, like ERP or ecommerce platforms, in the same year you buy and start using it. This means you’ll get immediate tax savings and won’t have to spread the deduction over several years.
For example, if you buy an ecommerce platform in 2024 and it’s fully operational by year-end, you can write off the entire cost in 2024.
Section 179 can also apply if you finance or lease the software. This means you can spread out the payments while still deducting the total purchase price, helping you better manage cash flow while taking advantage of the immediate tax benefits.
Example:
Suppose you invest $500,000 in a new ERP system and ecommerce platform in 2024. Under Section 179, you can deduct the entire $500,000 in the same year, reducing your taxable income for that year. This would directly decrease the taxes you owe, which could save you tens of thousands of dollars, depending on your tax rate.
To take full advantage of Section 179, a dealer must work closely with their accountant to ensure the deduction is properly applied. Here’s a step-by-step guide on how a dealer can implement the tax benefits and what they should communicate to their accountant:
Purchase the software or equipment
Communicate intent to use Section 179 to the accountant
Verify section 179 deduction eligibility
File IRS form 4562
Evaluate taxable income
Key points to communicate with the Accountant:
By providing clear and organized information, your accountant can accurately calculate the Section 179 deduction and apply it correctly. This will result in a significant tax benefit for your business, especially for large software purchases like ERP and ecommerce systems.
By leveraging Section 179, your business can make significant investments in critical software like ERP and ecommerce platforms while enjoying substantial tax benefits. ECI's ERP and ecommerce solutions are designed to help B2B distributors streamline operations, manage resources efficiently, and enhance the customer experience. Don’t miss this opportunity to upgrade your technology infrastructure and position your business for long-term growth while reducing your tax burden.
Ready to invest in the future of your business? Explore ECI’s ERP and ecommerce software to take full advantage of Section 179 before the year ends!